On Tuesday, the price of Gold (XAU/USD) saw a slight decline, trading in the $2,310s, as upbeat market sentiment favored riskier assets over the safe-haven precious metal. Despite expectations from respondents in a survey by the World Gold Council (WGC) for robust demand in 2024, Gold faced downward pressure.
The decline in Gold prices, dipping by over a quarter of a percent, coincided with a surge in US stock indexes to new record highs on Monday, fueled by a tech stock rally. This positive mood extended into the Asian trading session, contributing to gains across major Eastern bourses.
Market expectations currently anticipate a 0.25% reduction in the US Federal Reserve’s Fed Funds Rate by September, with a probability of approximately 55%. This outlook persists despite the Fed’s recent revision upwards of its interest rate trajectory projections in June, which typically dampens the appeal of non-yielding assets like Gold.
The WGC’s “2024 Central Banks Gold Reserves Survey” underscored strong central bank interest in Gold, revealing that 81% of respondents foresee an increase in overall central-bank Gold reserves this year, compared to 19% expecting no change and none anticipating a decrease. This marks a notable increase from the 2023 survey results.
Specifically, 29% of respondents expect their central banks to augment Gold reserves in 2024, while 68% anticipate them to remain unchanged and a mere 3% foresee a decrease. The survey highlighted Gold’s role as a long-term store of value and hedge against inflation as the primary driver influencing central banks’ decisions.
These survey insights suggest continued robust demand for Gold from central banks, which could provide underlying support for Gold prices in the longer term, despite current market dynamics favoring riskier investments.
In summary, while Gold faced downward pressure amid a positive risk sentiment in markets, the strong central bank demand forecasted for 2024 remains a bullish factor for the precious metal moving forward.
