Grant Sporre

Gold remains somewhat overvalued versus our fair-value model, carrying a $150-per-ounce risk premium. Regional conflicts may be contained for now, which could see this premium fade in the coming three months, yet perceptions of elevated geopolitical risk have kept central banks buying gold at a record pace and this may continue over the next two years. Some of gold’s main drivers, such as real interest rates, the dollar and equities, might turn positive for the metal, especially with a Fed pivot looking more likely in early-to-mid 2024. A sticky risk premium, robust central-bank purchases and the potential for ETF outflows to switch to inflows are strong support factors.

Three main drivers: the rate of central bank purchases; the pace and timing of Fed interest rate cuts; escalation / de-escalation of regional conflicts.