Shining Through Q1: First Quarter 2024 Gold Report
Gold returned 7.1% in Q1 2024, maintaining a strong momentum and feeding on several different profiles of buyers (private investors, central banks, etc.), which enabled the metal to reach all-time highs. On March 28th, we saw gold at 2214.35 USD per troy ounce, per the LBMA fix, right at the end of the quarter.
It is noteworthy that USD has performed strongly during the last three months, gaining 7.15% against CHF and 2.30% against EUR. This in turn adds to the gains if the investor’s base currency is CHF or EUR. As an example, the investor holding gold for Q1 2024, who has invested in CHF, would have earned a whopping 13.2% profit.
Conventionally, we see a negative correlation between the USD and the price of gold. However, this quarter, the precious metal did not seem to be overly rattled by it. Indeed, a strong dollar tends to deter foreign buyers from entering a gold position as the precious metal becomes relatively more expensive, diminishing demand.
As key drivers for the recent gold rally, we still believe armed conflicts, notably in the Middle East and at the Russo-Ukrainian front, are playing an important role in hedging against geopolitical instability. Meanwhile, gold investor hedging against inflation is more likely influenced by monetary policies, as rate cuts are still being deployed across developed economies.
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A bullish sentiment on gold is largely attributed to the expected decline in interest rates by summer. However, let’s factor in that Federal Reserve Board Governor Waller sees no rush in cutting short-term interest rates, stating that economic indicators might hinder or lessen the urgency of rate cuts. For instance, the optimistic US manufacturing data unveiled on April 1st has cast uncertainty on whether the Fed will execute three interest rate cuts within the year.
Overall, this quarter was marked by a positive sentiment on gold and substantial buy orders, all translating into a vibrant and dynamic market, displaying higher volatility than the S&P 500. Given the current economic and geopolitical climate, there’s a likelihood that gold prices are not done tackling all-time highs during Q2 2024.