The World Gold Council (WGC) is anticipating a flat demand for the precious metal in the expected case of a “soft landing” scenario. However, the institution states that a recession is still not off the table, given that the U.S. Federal Reserve has managed only to pull off two soft landings in nine tightening cycles.
World Gold Council Examines Gold Demand in Various Scenarios
The World Gold Council (WGC) has released its 2024 Gold Outlook report, which examines the possible behavior of the gold markets for next year. According to the institution, the most likely scenario, expected by the markets due to the prediction of growth ahead, is a U.S. economy “soft landing,” forecasting that the Federal Reserve will be able to lower inflation without setting up a decline in the country’s economy.
Gold would not be favored in this scenario, as investors historically have favored bonds and stocks instead. However, a soft landing, albeit expected, is still not sure to happen. According to the report, a recession is still not off the table, given that seven of nine tightening cycles of the Fed have resulted in recession. The behavior of the labor market will be significant, as its situation has considerably worsened in recent months.
In this context, the WGC predicts a favorable outcome for gold investors, with markets taking a “flight to safety” approach. The report stated:
If a recession becomes a reality, weaker growth will help push inflation back towards central bank targets. Such an environment has historically created a positive environment for high-quality government bonds and gold.
In addition, the geopolitical events happening on the planet, including war, conflicts, elections, and above-trend gold purchases by central banks that have escalated historically during the last two years, might also boost gold’s performance as an investment asset in 2024.
How do you think gold will perform in 2024? Tell us in the comments section below.
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