Is 2024 the year of the goldilocks scenario?

Darius McDermott – 12/03/2024

This article first appeared in Professional Paraplanner on 11 March 2024


The price of gold hit a record high in early March thanks to growing geopolitical concerns, coupled with optimism on US interest rates being cut in the late spring/early summer. As of writing, the spot price for gold hit $2,143.55* (about £1,683) an ounce, but is it just the start of the latest rally for the yellow metal?


I’ve often viewed gold as a great guide for the pulse of the economy, for example I remember gold-backed ETFs reached a record a high of 3,185 tonnes in the first quarter of 2020 – highlighting the uncertainty of Covid on the global economy at that point.


Recent moves have been more incongruous, on the one hand we have the aforementioned geopolitical and economic tensions – but we also have to remember the precious metal tends to underperform in higher interest rate environments because it doesn’t pay an income.


But 2023 (and the start of 2024) have seen a slight change in this traditional behaviour. The price of gold rose 13.1% in 2023** – following two years of negative performance. It should be noted that a big chunk of that performance came in Q4 (when it became clearer we had reached peak interest rates), but I’d point to performance in the second and third quarters – when the asset class fell 2.5 and 3.7% respectively**. To me, gold was remarkably resilient at a time when there were real fears about how high rates would actually go.


So why might this only be the start of the next gold rush? Well, gold-backed ETFs account for a significant part of demand for the gold market. In January, figures from the World Gold Council showed global physically-backed gold saw outflows of $2.8bn – this was the eighth consecutive month of outflows***. Last year, global gold ETFs saw a third consecutive annual outflow, losing 244t***.


So while you’re seeing central banks buying at speed – coupled with resilient jewellery consumption – it is being offset by ETF outflows remaining consistent.



Jupiter Gold & Silver fund manager Ned Naylor-Leyland says while the recent price action in gold is encouraging, there is plenty of scope for further growth.


Naylor-Leyland says gold is always forward looking and therefore has already largely digested a reduced outlook for rate cuts from the Fed in 2024. He also says there’s growing anticipation in the markets regarding the Fed’s expected transition towards a more accommodative monetary policy stance, which is why gold has started trending higher recently.


But there is more beyond this alone. Ned says: “Macro and rates aside, we are seeing massive buying from China, not only at a central bank level, but also from a wholesale level, with demand flows for January and February being the most on record. There’re also the black swan implications of seizing Russian FX reserves and knock-on implications for other sovereign nations to hold US debt. In short, there are plenty of fundamental drivers for gold, although we are yet to see the broader participation from Western investors (via ETF inflows) that is generally needed for the bigger breakout.”



Ninety One Global Gold fund manager George Cheveley also believes there is more headroom for the asset class, adding that the price has been held back by the Federal Reserve rate rises for the past 18 months.



He believes the combination of rate cuts and geopolitical tensions are encouraging many central banks to increase gold holdings, partly as a way of diversifying away from US dollar holdings into an asset that can be held domestically. In short, the risks to global gold prices are skewed to the upside.




Plenty of managers are wary of the ongoing geopolitical threat. For example, Orbis Global Balanced manager Alec Cutler told us he had a 10% position in gold towards the back end of 2023, with rising global conflict one of his principal concerns for the position.



Is breaking through the $2,150 barrier significant for physical gold and the potential for gold equities?


As of writing, the price of gold is approaching the $2,150 mark, a point that Ned believes could have a significant impact, particularly for gold equities. Gold miners have generally disappointed for a long time and have struggled to make their cost of capital, with inflation not helping in this respect. However, miners can offer more upside in a bull run for the metal, particularly when projects which weren’t viable suddenly become viable again as the price rises.


He believes investors are waiting for gold to reach a meaningful breakout above $2,150/oz, adding that the lack of participation has negatively affected gold equities more than bullion. “We see a brighter picture should $ gold break above $2150/oz as there is plenty of sensitivity in play and net asset value and free cash flow multiples are as low as we have seen them since the fund launched in 2016,” he adds.


WS Amati Strategic Metals manager Georges Lequime says while consensus is the Fed will cut rates in 2024, the question is whether this is on the back of lower than expected inflation or a weakening economy. He says: “Under both scenarios gold and silver prices should do well judging by the rallies that we have historically witnessed following the end of a rate cycle”.


So how high could gold go on this occasion? Research from J.P. Morgan believes the asset class could peak at $2,300/oz by 2025, although this prediction assumes a Fed cutting cycle initially delivering 125 basis points of cuts over the second half of 2024, pushing gold prices to new nominal highs^.


We often evaluate our portfolios based on valuations, but gold is arguably the outlier in this scenario as we feel it is a great diversifier and store of wealth. Things are looking more attractive now, but even for detractors I would say the one thing about gold, as an investor, is you never know when you are really going to need it.


The pros and cons of investing in gold


  • There’s a lot of geopolitical risk in the world. If tensions continue to rise this should be good for gold
  • Interest rates seem to have peaked and financial conditions show signs of easing
  • Some banks are still facing difficulties in the US. They may start printing money again which would benefit gold
  • China is starting to experiment with its own version of QE as it struggles with weak demand


  • Gold doesn’t yield. The opportunity cost of owning gold is considerably higher in a world of positive real interest rates.
  • Real rates have risen considerably and it hasn’t really hit the price of gold yet – potentially leaving it overvalued
  • Gold is facing challenges from digital alternatives like Bitcoin


Three funds to consider




Jupiter Gold & Silver


This fund combines physical gold and silver bullion with mining shares which offer deep relative value. The fund’s neutral position is 50:50 gold/silver. The fund is very sensitive to geopolitical risk and typically avoids mining companies which invest in dangerous parts of the world.




BlackRock World Mining Trust


This trust has significant flexibility to invest across various metals and mining companies, including unquoted companies. The trust also offers an alternative – and attractive – source of income to investors. The result is a conviction-led approach to investing in the mining sector, as opposed to focusing on the short-term direction of commodity prices. The trust currently has a 13.4% allocation to gold^^.




WS Amati Strategic Metals


This fund invests in roughly 40 internationally listed metals and mining companies whose revenues are sourced from the sale of strategic metals. These are metals that have strategic importance to the global economy and future macroeconomic trends. Gold and silver account for roughly 31.7% of the portfolio today^^.


*Source:, data at 6 March 2024

**Source: Invesco Gold report, Q4 2023

***Source: World Gold Council

^Source: J.P. Morgan Research, 17 January 2024

^^Source: fund factsheet, 31 January 2024






Please Note:

This article was published by Fund Calibre and is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. 


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