A Rollercoaster Recap of Gold in 2023
Before we dive into the crystal ball for 2024, let's take a moment to appreciate gold's glittering performance in 2023. The precious metal soared 15% to a record-breaking annual close of $2,078 per ounce, leaving investors dazzled and critics eating their words. This stellar rise was fueled by demand from emerging markets and central banks, spiced up with geopolitical tensions and a dash of higher interest rates. But as we're still at the beginning of 2024, the million-dollar question looms: Will gold continue its victorious march?
Some of the primary fundamental concerns for gold
Weaker Global Economic Growth: Brace yourselves; the global economy is expected to hit a soft patch, thanks partly to the hangover from recent rate hikes. A predicted 0.5% dip in growth, particularly from the U.S. and China, suggests we're in for a bumpy ride, albeit with Asia somewhat cushioning the fall.
Stubborn Inflation: If inflation overstays its welcome, we're looking at a scenario where "higher for longer" rates could become the new normal, potentially stifling growth in the medium to long term.
Currency Drama: A prolonged technical pullback of the greenback coupled with expected rate cuts by the U.S. Federal Reserve puts the world's primary reserve currency in an expectedly weak position.
However, globally, there is a continued distrust of fiat currencies - one only has to look at the massive demand for physical gold in Turkey as an example of how sharply demand can increase.
Geopolitical Concerns: Russia's invasion of Ukraine is increasingly bringing worry that the conflict will drag on other nations states. With more frequent calls for the E.U. to create its standing army, NATO has already doubled the number of its battlegroups from four to eight and increased the battlegroup size from battalion strength to full brigades.
The most worrying sign of another pan-European conflict is the massive NATO series of war games in late January 2024 involving nearly 100,000 troops - the largest exercise since the Cold War.
Competition With Bitcoin: A growing concern for gold investors is the dramatic rise and trust in Bitcoin not only as an investment and speculative asset but as a hedge against inflation and uncertainty. Additionally, it's easier to access and store than physical gold. Some analysts believe that gold has lost an additional 5-8% in gains due to the rise in Bitcoin's acceptance.
The Technical Case Is Bullish
From a technical perspective, gold's price action is extremely bullish. Since the beginning of 2024, sellers have attempted to push gold below a key support zone between the Tenkan-Sen at $1,981 and the 50% Fibonacci extension at $2,010. Buyers have, thus far, kept gold above those levels.
Near-term resistance is the 61.8% Fibonacci retracement at $2,110. If gold were significantly extended away from the Tenkan-Sen or displaying any major overbought signals in its oscillators, $2,110 might be difficult to cross. However, all conditions are presently neutral and would support a significant breakout if buyers were to commit to such a move. Futures and spot traders will likely be taking profit near the 100% Fibonacci expansion of around $2,473.
