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The safe haven appeal of gold amidst rising geopolitical risks in 2024

Gold’s stellar performance in 2023

Gold showcased remarkable resilience in 2023, surpassing expectations in a high-interest-rate environment and outperforming commodities, bonds, and global equities (excluding US stocks). Before examining the prospects of the yellow metal in 2024, let’s first understand the investment case for gold and its key price drivers.

The unique appeal of gold
Gold is a unique asset class. During periods of economic uncertainty, investment demand for a safe-haven asset drives gold prices. At the same time, during periods of economic expansion, pro-cyclical consumer demand can support gold price performance. These two factors give gold the ability to provide stability in a range of economic environments. Most other commodities typically do not have this unique profile.

We can divide gold demand into three categories:

Economic expansion: positive for gold consumption as an expanding economy increases demand for jewellery and electronics
Risk and uncertainty: gold tends to shine in times of heightened risk and uncertainty, attracting investors seeking a safe haven
Opportunity cost: gold faces headwinds when bonds provide higher yields, and tailwinds when bonds provide lower yields.

2024 outlook: the US economy’s impact on gold: Read the article