Gold Market Outlook: What's Next for Gold Investment in FY24?

Gold Market Dynamics

Gold has demonstrated significant growth in 2024, with spot gold prices surging approximately 22%, while MCX gold futures increased by 14%. This surge clearly indicates that precious metals, particularly gold, have become a favored asset class for global investors. Recently, spanning from July 31 to August 23, 2024, gold prices have continued their upward trajectory. International markets saw a 2.61% increase, while the MCX experienced a 4.01% rise during this period.

Central Bank Accumulation: A Key Factor

Central banks across the globe are accumulating gold, adhering to principles of safety, liquidity, and return. In fact, global central bank purchases have ramped up to over 1,000 tons per year between 2022 and 2024, reflecting a sharp demand among financial authorities. In the first quarter of 2024 alone, net gold reserves rose by 290 tons, marking the highest total in the past two decades.

Interest Rates and Gold Prices

With the current Federal Reserve interest rate at 5.25% to 5.50%, the likelihood of rate cuts has become a significant focus among investors. Signs from the most recent Federal Reserve meetings suggest that policymakers agree on the suitability of lowering interest rates this quarter. The historical inverse correlation between interest rates and gold prices means that potential cuts may lead to further increases in gold valuation.

Future Projections

Analysts are setting a tentative target of $2800/ounce for gold prices, driven by upcoming economic shifts, including interest rate dynamics and the results of the US elections. Accumulation zones are identified at around $2300/ounce for long-term investors, while targets for MCX gold prices are projected to rise towards Rs. 78000/10 grams by the end of 2024.

Investment Considerations

Despite a decline in physical gold demand due to pandemic restrictions, the continual acquisition of gold by central banks and increasing ETF holdings suggest a bright future for gold investment. With expectations for prices to move towards $1850 in international markets within the next month, investors are encouraged to consider both physical and digital forms of gold investment.