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Gold May Hit New Highs In 2024

Illustration shows representations of cryptocurrency Bitcoin plunging into water

Key Points:

  • Gold managed to stay above the key $2000 level despite rising Treasury yields.
  • Strong demand from central banks provided significant support to gold markets.
  • Investment demand for gold should rise when Fed starts cutting rates.

Gold Stays Above $2000 Despite Changes In Fed Policy Outlook

Recent inflation data and Fed’s comments have led to material changes in Fed policy outlook.

FedWatch Tool indicates that there is a 63.9% probability that Fed will leave the interest rate unchanged at the meeting in May. Traders expect that Fed will start cutting rates in June.

Not surprisingly, the changes in Fed policy outlook pushed Treasury yields away from multi-month lows. Currently, the yield of 2-year Treasuries settled near the 4.65% level, while the yield of 10-year Treasuries climbed towards 4.30%.

Rising Treasury yields are bearish for gold and other precious metals that pay no interest. Gold made an attempt to settle below the psychologically important $2000 level but this pullback was quickly bought. From a big picture point of view, gold continues to consolidate above $2000 after the test of all-time highs in December 2023. What is driving demand for gold?

Central Banks Keep Buying Gold

The recent data indicates that central banks were actively buying gold for reserves in 2023. Geopolitical uncertainty was the key driver for central bank demand.

Gold is the only reserve asset that is fully controlled by the holder, so it’s not surprising to see that central banks want to increase the share of gold in their reserves.

Importantly, gold managed to stay above the $2000 level despite outflows in gold ETFs, highlighting the strength of the core demand for gold holdings.

Most likely, rising demand for gold from central banks will be a multi-year trend. Geopolitical tensions are rising year after year, so central banks have no choice but to diversify their holdings and increase the share of gold in their portfolios.

In the near term, AI hype and strong crypto markets may serve as negative catalysts for gold markets as investors rush into riskier assets. In the second half of the year, when Fed starts cutting rates, investment demand for gold would likely increase, pushing gold towards new highs.

For a look at all of today’s economic events, check out our economic calendar.

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News

The Market News Today: TSMC Diversifies, Opens First Japan Chip Factory

SEC Chairman Gary Gensler testifies on budget before a House Financial Services and General Government Subcommittee hearing on Capitol Hill in W

Key Points:

  • TSMC expands to Japan amid U.S.-China tensions, diversifying supply chain.
  • Reddit’s IPO offer met with skepticism from users over “karma” concerns.
  • Buffett’s Berkshire faces growth slowdown, sits on record cash reserves.
  • AT&T offers $5 credit after nationwide network outage, promises prevention.
  • Samsung unveils Galaxy Ring with health-tracking features, enters smart ring market.

1. TSMC Expands to Japan Amid Rising U.S.-China Tensions

Taiwan Semiconductor Manufacturing Company (TSMC) inaugurates its first chip factory in Japan, seeking to diversify its supply chain away from Taiwan amid escalating U.S.-China trade tensions. As the world’s largest chip contract manufacturer, TSMC’s move reflects efforts to strengthen global supply chains and mitigate geopolitical risks. The Japanese facility, set to commence production by late 2024, signifies a strategic expansion for TSMC, supported by substantial investments from both the company and the Japanese government, aimed at fostering growth in Japan’s semiconductor industry. (CNBC)

2. Reddit’s IPO Invitation: Users Decline RSVP, Cite “Karma” Concerns

Despite Reddit’s offer for users to invest in its IPO, many are hesitant to buy into the platform they’ve already contributed to for free. Moderators and power users express skepticism, citing Reddit’s history of losses and controversies. The company’s attempt to reward contributors may not yield the expected enthusiasm, potentially affecting its market debut. As Reddit extends its IPO offer, users weigh the risks of investing in a platform they’ve long supported. (Wired)

3. Buffett’s Berkshire: Growth Forecast Hits a Pile of Cash

Warren Buffett’s cautionary words signal the end of Berkshire Hathaway’s explosive growth era, citing limited investment options and record-high cash reserves. Despite past transformative deals, Buffett acknowledges the scarcity of opportunities both in and outside the US, with the conglomerate’s $167.6 billion cash pile overshadowing recent acquisitions. As Buffett’s successors prepare to navigate Berkshire’s future, they face the daunting task of maintaining stability amid dwindling prospects for remarkable gains. (Reddit)

4. AT&T Offers $5 Credit After Nationwide Network Nightmare

AT&T extends a $5 credit to affected customers following a nearly 12-hour network outage. The telecom giant acknowledges the inconvenience caused, promising preventive measures for future incidents. While investigations continue, AT&T assures the outage stemmed from an internal error during network expansion, ruling out cyber threats. As regulators scrutinize the incident, AT&T emphasizes its commitment to safeguarding network reliability. (CNN)

5. Ring in the Future: Samsung’s Health-Tracking Bling

Samsung unveils its Galaxy Ring, a wearable packed with health-tracking features, marking the tech giant’s entry into the smart ring market. The device offers vital stats like heart rate and sleep patterns, complemented by a “vitality score” to gauge readiness. As Samsung embraces AI for deeper health insights, the Ring hints at a future where digital assistants coach users toward better health. With potential for contactless payments and more, the Ring aims to dazzle in the evolving wearable landscape. (CNBC)