Explore first quarter Q1 2024 gold and silver outlook, balancing geopolitical tensions, real yield risk, and mixed silver signals.
In a year marked by conflicts and banking stress, gold exhibited significant volatility in 2023. The precious metal faced a decline in Q3 amid a rising dollar and Treasury yields, only to reverse course in Q4 as both indicators plummeted. Gold soared as a safe-haven asset during banking turmoil and geopolitical unrest, breaking previous all-time highs.
Heading into Q1 2024, expectations suggest a moderation in US growth and further progress in inflation, putting pressure on the Federal Reserve to cut elevated interest rates. Despite this, the fundamental landscape appears supportive of precious metals, favoring bullish potential.
Gold and Silver Insights for the First Quarter (Q1) of 2024
While 88% of clients remain net long on silver, recent changes in longs, shorts, and open interest indicate a mixed sentiment. Daily shifts show no significant change, but weekly data reveals a slight decrease in longs and an increase in shorts.
Both silver and gold often respond similarly to market developments, with an inverse relationship to US Treasury yields and the US dollar. The recent decline in Treasury yields and the weakening of the dollar have contributed to the rise in gold prices. Even with the possibility of another rate hike, the lower trend in yields and the USD are likely to support precious metal prices.
The broader commodity complex also shows signs of recovery, driven by a lower US dollar and the anticipation of faster-than-expected interest rate adjustments. The Bloomberg Commodity Index, which includes gold and silver, plays a significant role in this recovery.
March and October 2023 highlighted gold’s sensitivity to systemic and geopolitical threats. As we enter 2024, market participants must monitor developments between China and Taiwan and growing tensions involving North Korea, Japan, South Korea, and the US.
Despite the overall positive outlook, one risk to a bullish scenario for gold in Q1 2024 is the prospect of the Fed funds rate remaining above 5% while inflation decreases. This scenario could elevate real yields, potentially diverting capital from non-yielding gold and silver toward alternative money market options.