JP Morgan Projects Record Gold Prices in 2024

Article cross-posted from Zero Hedge.

JP Morgan forecasts $2,000 gold by the end of the year with the price continuing to rise to record highs in 2024.

In his latest note, JP Morgan executive director of global commodities research Greg Shearer projects the price of gold will average around $2,175 an ounce by the fourth quarter of 2024. That would represent an 11% increase from the current price.

Shearer anticipates the end of the Federal Reserve hiking cycle after the July meeting with a cut likely by mid-2024. He said there is even further upside potential for the yellow metal if the US economy falls into a recession. The deeper the recession, the more the Fed will have to cut interest rates, which is more supportive of gold.

We’re in a very prime place where we think gold ownership and long allocation to gold and silver is something that acts as both a late cycle diversifier and something that will perform as we look to the next sort of 12, 18 months.”

With much stronger-than-expected second-quarter GDP growth and continued labor market strength, a growing number of people in the mainstream now think the US has escaped the clutches of a recession despite the Fed driving interest rates to the highest level in 16 years. Federal Reserve Chairman Jerome Powell said staff economists at the central bank now project a noticeable slowdown in growth starting later this year, “But given the resilience of the economy recently, they are no longer forecasting a recession.”

But there are plenty of signs that a recession is looming, including 15 consecutive drops in the Index of Leading Economic Indicators (the most consecutive negative prints since 2007-2008), an inverted yield curve, and a rising number of corporate defaults.

Given the fact that the Fed has taken away the economy’s lifeblood – easy money – a deep recession seems more likely than not. The economy was built on artificially low-interest rates and quantitative easing. We saw what happens to an over-leveraged economy when the Fed takes away the easy money back in 2008. The situation is much worse today than it was then, with more debt and more malinvestments.

According to JP Morgan’s mid-year forecast, analysts anticipate gold prices to average around $2,012 an ounce in the second half of this year.

This would continue the trend we saw through the first half of 2023. Despite a lackluster June, the price of gold rose 5.4% through the first six months of the year and ranked as the second-best performing asset class behind only developed market stocks.

Shearer said money managers have increased net-long positions in gold futures this year, but the trade still is not too crowded.

He also said institutional buying will boost strong retail demand as central banks continue to diversify away from the dollar and hedge against geopolitical risk.

There’s an eagerness here to really buy in and diversify allocation away from currencies.”

Overall, global central bank gold reserves increased by 228 tons in the first quarter of 2023. This was 38% higher than the previous first-quarter record set in 2013.

According to the 2023 Central Bank Gold Reserve Survey released by the World Gold Council, 24% of central banks plan to add more gold to their reserves in the next 12 months. Seventy-one percent of central banks surveyed believe the overall level of global reserves will increase in the next 12 months. That was a 10-point increase over last year.