Debajit Saha

US economic policy decisions on interest rates, geopolitical tensions, elections in the world’s two largest democracies, and central bank buying as asset diversification will remain key factors in influencing gold prices this year. Physical demand will remain stable, but with a risk skewed to the downside. While US yield curves are comfortably placed at present and the visibility of an economic recession is not at all evident, at least in the first two quarters of this year, asset managers may continue to consider gold as a potential hedge against any eventuality arising out of an economic recession, geopolitical unrest, or the possibility of both. The second half is crucial, as we believe that is the time when the Federal Reserve decides to start to cut interest rates. The US presidential election is also scheduled during this time. On balance, we are moderately bullish on gold this year.

We expect silver to remain in an elevated range in 2024 with speculation at the centre of attention when the Federal Reserve starts cutting interest rates. A lower interest rate weakens the US dollar and thus supports the price of precious metals. Though gold is the largest beneficiary, silver follows. We anticipate that industrial demand, which performed well last year, led by photovoltaic, to consolidate in 2024, while demand will continue to remain sluggish in major physical markets led by India and China due to higher prices.

Following the rapid price decline in 2023, major producers have already initiated a halt to the expansion of new projects to contain costs and remain competitive in a market in transition. While consumers’ inclination towards electric vehicles is increasing rapidly, retail demand for jewellery and investment is not adequate to support the price. We expect demand for heavy-duty trucks will continue to remain sluggish in the European market, thanks to the region’s economic slowdown, while the global shift to electric vehicles in the small car segment continues to put pressure on autocatalyst demand in 2024. Meanwhile, jewellery demand in major Asian hubs is not expected to grow, as consumers still prefer gold to platinum.

Palladium prices came under pressure in 2023 due to shifting consumer demand towards electric vehicles (EV) and, partially, automakers preferring platinum over palladium as an autocatalyst. We believe this trend will continue in 2024 as supply is expected to rise from secondary sources (recycling) and the production of EV vehicles surges as more automakers set up factories to ramp up production. However, we are expecting a rebound from the current multi-year low level in the second half of the year.