Even if current market expectations prevail, gold still has a chance to outperform in H2 2024 if Western flows pick up, the World Gold Council said.
After gaining good momentum in the first half of the year, the gold market could see a rangebound performance from its current levels in the second half, according to the World Gold Council.
The conclusion was reached following an analysis of the four main drivers of gold, namely: opportunity cost, economic expansion, risk and uncertainty, and momentum. WGC’s analysis used “expected” rather than “observed” values for each of the driver used (see graph).
In this context, a rangebound return suggests that the gold market is fairly efficient and broadly reflects the available market information, the Council said, noting that it’s not the first time it has described a similar anticipated outcome for gold.
Also, given that gold is already up by more than 10% this year and consensus suggests a similar result for the full year, it reiterates that gold – supported by contributions from other sectors – can perform well even when rates remain as expected.
Even if current market expectations prevail, gold still has a chance to outperform in H2 2024 if Western flows pick up, the WGC report said, pointing to the low retail investment demand and ETF inflows during H1.
Gold’s strong performance, despite the absence of strong Western flows, suggests that, unlike previous periods when gold broke record highs, the market is still not saturated and could see another leg up, it stated.
Conversely, in the event that central bank demand drops drastically, rates remain high for longer and Asian investor sentiment flips, we could then see a pullback in the second half, the WGC warned.
Read the full report here.
