The World Gold Council anticipates a recession in the United States
The World Gold Council has presented its forecast for 2024, anticipating a recession in the United States and an increase in gold prices. This seems logical, considering that during previous recessions, the precious metal has demonstrated positive dynamics.
Over the past half-century, the global gold market has shown high sensitivity to the state of the American economy. During economic downturns, there is always an increase in demand for the precious metal. It's worth noting that, according to statistics from the last 50 years, the United States has managed to avoid a recession only in two out of nine interest rate hike cycles. This is not surprising, as prolonged high-interest rates inevitably put pressure on financial markets and the real economy.
The futures market in Chicago suggests a decrease in interest rates in the United States by March 20, 2024. Historically, rate cuts in the U.S. usually began around 6-13 months before the onset of a recession.
Another interesting aspect is the budget deficit. This year, the U.S. Treasury will have to spend over $1 trillion on interest payments on the national debt. To cope with this without causing much pain, authorities will need to significantly increase the tax burden. However, in an election year, it's unlikely that anyone will take such a step. Government expenditures are growing faster than revenues, and this gap will only widen with each passing month.
Furthermore, there is a high probability that the Federal Reserve will once again activate the "printing press" and start buying government bonds onto its balance sheet. In the past, such a move has always had a favorable impact on the price of gold, and this time the yellow metal is likely to receive support from "helicopter money" as well.
According to the World Gold Council's forecasts, in 2023, excessive demand from central banks led to a 10% increase in the yield of gold. This trend is expected to continue in 2024, as the central banks of China, Singapore, and India will continue actively acquiring the precious metal.
There are also plenty of geopolitical risks for 2024, including the Middle East, North Korea, and the elections in Taiwan. Geopolitics is also favorable for strengthening gold.
In conclusion, considering all of the above, gold seems to have genuinely promising prospects for this year.
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