The Gold Market is Well-Positioned for the Second Half of 2024 – World Gold Council

(Kitco News) -The gold market is waiting for a new catalyst as prices are stuck below $2,350 an ounce. However, investors should not forget what has been accomplished so far this year, according to the latest report from the World Gold Council (WGC).

Although gold could continue to consolidate in the near term, analysts with the WGC see the precious metal well-supported through the second half of the year.

“Gold may remain range-bound if current market expectations prevail,” the analysts said in the report. “However, there’s a clear path for gold to outperform from here, likely fueled by Western flows.”

While gold might be stuck in neutral, Juan Carlos Artigas, Head of Research at the World Gold Council, said in an interview with Kitco News that the current price action doesn’t diminish its accomplishments in the first half of the year.

Year-to-date gold prices are up roughly 12%; the yellow metal is one of the best-performing assets in global financial markets, Artigas said.

Gold has been able to make its gains despite a difficult market, as the Federal Reserve’s aggressive monetary policy has supported higher bond yields and a stronger U.S. dollar.

Artigas noted that gold has been able to withstand these traditional headwinds due to robust retail demand in Asia and record purchases from central banks. However, the market is now looking to Western investors for the next move in the uptrend.

The U.S. central bank has been reluctant to embark on an easing cycle, but it has signaled one potential rate cut by the end of the year. According to the CME FedWatch Tool, markets see a nearly 70% chance of a rate cut in September.

Artigas noted that there are emerging signs that Western investors are starting to take an interest in gold as outflows from gold-backed ETF markets have started to reverse.

“Over the past couple of months, we have started to see inflows into Europe,” he said. “I think it's not a coincidence that it started with the first rate cut by the ECB.”

Although the gold market currently lacks a catalyst, the WGC noted that ongoing geopolitical uncertainty, the threat of an economic slowdown, and persistently stubborn inflation will continue to create a positive environment for gold.

“Political polarization, armed conflicts, and erosion of globalization in favor of nationalism and select alliances fuel economic instability,” the analysts said. “Geopolitical risk is particularly difficult to predict and may come from where it’s least expected. What is true, however, is that gold reacts to geopolitics, adding 2.5% for every 100-point increase in the Geopolitical Risk (GPR) Index. And while part of this effect can be transient, it could also be a trigger for deteriorating financial conditions, which may have a more lasting effect.”

At the same time, the WGC expects that central banks will continue to buy gold through the second half of the year. Artigas said that while central bank demand may not reach the records set in the last two years, they expect it to be above the 10-year trend of 500 tonnes.

“Central banks are well positioned to see a robust year of gold demand,” Artigas said.

“Given that central bank demand is often policy-driven, timing is difficult to ascertain, but our recent central bank survey provides some reassurance: gold reserves managers believe they will retain their positive outlook towards gold,” the WGC said in the report.