Gold prices are expected to reach new heights in 2024, driven by several factors that market experts are closely monitoring.

Here’s a detailed look at why gold is set to hit new highs:

Anticipated Federal Reserve rate cuts

A major factor behind the bullish gold outlook is the anticipated rate cut by the US Federal Reserve.

The likelihood of a 50-basis-point rate cut on September 18 has risen to 41% from 34% a week ago, according to CME Group’s FedWatch tool.

Lower interest rates generally make gold more attractive because it offers a hedge against inflation and currency depreciation.

Weak labor market data

Recent US labor market data supports the expectation of a rate cut.

The ADP National Employment Change report showed a significant slowdown in hiring, with only 99,000 jobs added in August compared to the forecasted 145,000.

This slowdown, coupled with predictions of weaker nonfarm payrolls (NFP) data—forecasted to grow from 114,000 to 163,000—suggests a cooling labor market.

If these trends continue, the Fed may be prompted to cut rates, which would likely boost gold prices.

Geopolitical tensions

Ongoing geopolitical uncertainties continue to drive gold prices higher.

As Sugandha Sachdeva, founder of SS WealthStreet, points out, gold prices are expected to rise if geopolitical tensions persist.

Such tensions lead investors to seek the safety of gold, enhancing its appeal as a stable asset amidst global instability.

Weakening dollar

Gold prices typically rise when the US dollar weakens.

As the Fed considers rate cuts and economic uncertainties loom, the dollar may continue to decline, boosting gold’s value.

A weaker dollar makes gold cheaper for holders of other currencies, increasing global demand.

Robust physical demand

Physical demand for gold remains strong, providing support for higher prices.

Recent reports indicate official sector buying and consistent physical demand.

Renisha Chainani, Research Head at Augmont Gold, noted that gold prices have reached new two-week highs in anticipation of the NFP report, driven by expectations of a rate cut and a cooling labor market.

Chainani highlighted that despite the economic challenges, the demand for gold remains robust, reinforcing its price trajectory.

Macroeconomic volatility

Global macroeconomic volatility, including uncertainties surrounding the US elections and economic conditions in various countries, further supports gold’s rise.

Colin Shah, MD of Kama Jewelry, said that macroeconomic volatility drives investors towards gold as a hedge against market fluctuations.

This trend is expected to continue, supporting gold’s long-term appeal.

Domestic market factors

In India, gold prices have fluctuated due to domestic factors such as changes in customs duties and festive demand.

Although gold prices experienced a drop following the customs duty cut, the upcoming festive season, including Dhanteras, is anticipated to drive demand, Shah noted.

Increased purchasing power and seasonal buying could push gold prices to new highs.