The World Gold Council (WGC) sees a ‘soft landing’ for gold in 2024, according to its latest report. The scenario is 65 percent likely to happen, given the momentum from 2023 being sustained.
Titled the Gold Outlook 2024, the report outlined two other scenarios, a ‘hard landing’ that is 55 percent likely to happen and a ‘no landing’ situation happening at 10 percent.
The report further said, “Gold had a strong 2023, defying expectations amid a high interest rate environment, and outperforming commodities, bonds and most stock markets.”
Scenarios explained
In economics, a soft landing is a cyclical downturn that prevents recession. On the other hand, a hard landing happens as a result of tightening economic policies which usually bring high performing economies to a sudden correction in their growth.
In the case of gold, the WGC report stressed, “Heightened geopolitical tensions in a key election year for many major economies, combined with continued central bank buying could provide additional support for gold.”
However, a ‘soft landing’ implies a flat performance for gold, with upside potential. Meanwhile, a ‘hard landing’ could mean gold delivering a higher performance.
Read: Pros and cons: Guide to investing in gold
World Gold Council insights
More specifically, WGC’s report is citing market consensus for 2024 pointing to a ‘soft landing’ given expectations of positive, albeit subpar, growth ahead.
“Alongside an economic deceleration, market participants also expect inflation to cool sufficiently for central banks to begin cutting rates. Such a soft-landing scenario would be a welcome outcome for many investors. But its execution requires razor-sharp precision by policy makers and also relies on many factors outside of their direct control falling into place,” it further added.
According to the report, “the likelihood of the Fed steering the US economy to a safe landing with interest rates above five percent is by no means certain. And a global recession is still on the cards.” Hence, this should encourage many investors to hold effective hedges, such as gold, in their portfolios.
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