Learning about different asset classes and how they affect each other is one of my favorite things about markets. While it is not only fascinating, it also helps us diversify a bit which in turn helps us remain a bit more sane. 
Without further ado, Letâs start with the outlook for gold in 2024.
How was 2023 for Gold?
Despite having multi-decadal high-interest rates, Gold in dollar terms in 2023 generated more than 13% returns this year outperforming commodities, bonds, and most stock markets. It also matched the returns of the Nifty 50 and slightly outperformed Dow Jones.
While the nature of price is dynamic and subject to constant change, Closing above major resistance and psychological levels of 2000 against the dollar is a key thing to note.
Gold in 2023 - in INR terms
Gold in 2023 - in Dollar terms
Gold - Performance in Major Currencies
Source: IGWT report shared on twitter by incrementum
World Gold Council shared a report on Goldâs outlook for 2024 and here are some of the highlights:
Themes to watch out for in 2024
Three likely scenarios for US and global economy and its impact on Gold
With limited downside risks, the potential for an upside move seems more imminent in 2024 for Gold if things go south in the global economy.
All eyes on the Fed and a consensus market view of a soft landing
Despite some bumps along the way, the global economy proved remarkably resilient in 2023 and talks of an
impending recession diminished as the year progressed. Now, market consensus for 2024 points to a âsoft landingâ given the expectation of positive, albeit subpar, growth ahead.
How did gold fare during soft landing in the past?
A recession is not off the table yet
While the market odds favor the Fed pulling off a soft landing, this would be no mean feat. Historically, the Fed has managed a soft landing only twice following nine tightening cycles over the past five decades. The other seven ended in a recession. This is not all that surprising: when interest rates stay higher for longer, pressure on financial markets and the real economy generally builds.
A key determinant of whether economic conditions will shift from a soft to a hard landing is the labour market.
While unemployment in the US remains low, some of the factors that kept it resilient in 2023 â such as a dearth of labour supply and solid corporate balance sheets aided by a healthy consumer wallet â have not only faded but have a historical tendency to turn quite quickly.
Gold - The nature hedge during recessions
A (less likely) third option
A soft landing or a recession are not the only outcomes investors could face next year. A âno landingâ is also on the cards. This scenario is characterized by a reacceleration of inflation and growth. The rebound in US manufacturing and recovery in real wages are two potential drivers of such a scenario.
A scenario of no landing is less of an outcome but rather more of an interim state. As Morgan Stanley put it: âA no landing is just a soft or a hard landing waiting to happenâ. The below chart illustrates the same point:
Key things to track in 2024
Higher rates may spook
While positive economic growth would support consumer demand and higher inflation would increase the need for hedges, the combination of higher rates and a stronger US dollar would likely create a drag, as they did in September 2023. But if inflation surged again it could elicit an even stronger monetary response â leading us back to the spectre of a hard(er) landing further down the line and a strong case for strategic gold allocations.
Geopolitical risks abound
In 2023 there were two significant event risks â the SVB failure and the Israel-Hamas conflict. Geopolitics added between 3% and 6% to goldâs performance. And in a year with major elections taking place globally, including in the US, the EU, India, and Taiwan, investorsâ need for portfolio hedges will likely be higher than normal.
Central bank demand
Purchases by official institutions have helped gold defy expectations over the past two years. In 2023 we estimate that excess central bank demand added 10% or more to goldâs performance. And they will likely continue buying. Even if 2024 does not reach the same highs as the previous two years, the World Gold Council anticipates that any above-trend buying (i.e. more than 450â500t) should provide an extra boost.
What are your expectations from the shiny yellow metal in 2024?
