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John Reade, Chief Market Strategist at the World Gold Council (WGC), discussed his 2024 forecast and outlook for precious metals prices, including gold, silver, platinum and palladium, at the 2024 Prospectors and Developers Association of Canada (PDAC) Conference in Toronto, Canada.
He noted that gold performed well in 2023, ultimately outperforming most asset classes except U.S. equities, despite the impact of high interest rates. And one of the top reasons behind supporting the gold price was strong buying from central banks, which was the biggest support behind gold demand last year.
He noted that in addition to inflation, emerging market central banks’ perception that the dollar’s status as the world’s reserve currency may be under threat is a key reason that has prompted central banks to hoard gold. Gold demand is largely driven by the performance of these and other emerging market economies.
Looking ahead to 2024, Reade points out that there are many macroeconomic and geopolitical factors affecting the gold market. However, in the short term, changes in the financial markets will determine the price of gold.
The best-case scenario for the price of gold in 2024 would be a hard landing and the interest rate cuts that the Federal Reserve would have to take to save the economy. The worst-case scenario is that economic growth in US will not slow down to the point where interest rates need to be cut, and inflation will probably stay high enough that the central bank might even consider raising rates.
Reade also talked about the impact the U.S. election could have on gold demand in the coming months, suggesting that a Republican win could lead to the risk of the U.S. economy becoming even more isolated, potentially triggering a further flight from the U.S. dollar.
As for silver, Reade noted that strong silver demand from India had sent silver imports to a record high in 2022, but that demand failed to continue into 2023. This year has already seen silver demand from India rise again, which is a good sign. Following that, investors can keep an eye on the inventory data for silver to see if it continues to be low. However, Indian demand alone will not bring about a positive shift in silver prices.
Reade added that China’s economic recovery is very important for silver’s industrial demand, and if China’s economy continues to weaken, it may be difficult for silver prices to take off. In terms of the gold-silver ratio, silver does have a lot of upside.
When it comes to platinum and palladium, Reade said that both metals are actually in oversupply, with their main use being as catalysts for internal combustion engine vehicles. And since South Africa’s platinum and palladium production continues to be strong and cars already contain significant amounts of platinum and palladium, the metals will eventually be recycled, so there is little scope for price rises in the short term.
Platinum production is unlikely to see a cut until later in the year as South Africa’s general election approaches at the end of May, but Reade still sees more upside for platinum than palladium. He points out that platinum has almost always traded at a higher price than gold over the past 70 years, and therefore has more confidence in its long-term prospects.
