What's Boiling for Gold in 2024

A confluence of risk events throughout the year could provide renewed interest and support for gold as the most durable safe-haven asset.

A Very Active Calendar for Elections

Elections can profoundly impact markets and risk appetite, with 2024 a historic year as over 2 billion people will head to the polls in 50 countries. The US presidential election will likely garner the most international headlines as it also elects numerous state governors and renews Congress. Other major economies hosting elections include the UK, Mexico, India and South Africa. Additionally, the EU- the world's largest economy - will hold parliamentary elections in the summer. Elections with likely more predictable outcomes are scheduled elsewhere in Russia, Iran and Pakistan.

One election notably garnering geopolitical attention is Taiwan's. Not only because the unusual three-way contest leaves the potential outcome uncertain but also due to China's renewed push to integrate the island into its mainland. China's President Xi Jinping has upped rhetoric around Taiwan reunification as a key priority in his recent New Year address. He also raised the topic directly with US President Joe Biden during a recent visit to San Francisco.

Geopolitical Risks Still Persist

The aforementioned geopolitical risks emerge alongside an existing war in Ukraine and Israel's operation in Gaza that involves potential escalation in the Red Sea as Iran deploys warships. Iran is understood to back the Houthi rebels attacking regional shipping. Pending the resolution of the risks, safe-haven demand may remain elevated.

Monetary Policy and Dollar to Influence

In this environment, the relative strength of the US dollar will prove important in how gold performs. While benefiting from safe-haven flows, monetary policy actions may exert even greater influence. With the Fed expected to cut interest rates at least three times in 2024, but markets are forecasting up to six, lower US yields would be expected to support gold prices, improving its investment attractiveness - particularly if the global recovery lifts disposable incomes.

Long-Term Cup & Handle in Focus

Gold appears to be extending past the cup and handle neckline peak at $2080 an ounce. A breakout above the neckline is typically a bullish confirmation, signalling a continuation towards $2300 while trading above the handle's low at $1825. The target is calculated using the measured-move projection from the handle's low instead of the neckline. The neckline's longer-term target lies at $2550.

In the shorter term, gold may slide below the $1990 swing, forming the second trough of a potential rising wedge. This would add to the bullish probability but may also reduce the chances of extension, should it be of the ending rather than the leading wedge variation. On the other hand, falling towards the $1935 swing may increase speculation of losing the handle low, with the metal going into a likely consolidation until a valid breakout. Its breakdown, however, would likely mark the top for gold.

Source: SpreadEx / GOLD

Key Takeaways

Over 2 billion people in 50 countries will participate in elections in 2024, with potential market and risk impact. Geopolitical attention surrounds Taiwan's election due to China's integration efforts and ongoing risks from the war in Ukraine and Israel. The strength of the US dollar and monetary policy in the US will also influence gold's performance.