2024 will enter the global ** year, the global geopolitical landscape is complex and changeable, and central banks may continue to increase their holdings in the context of "de-dollarization", supporting gold prices.
This journal is specially invited to write an article by Zhang Bo.
In 2024, the central banks of Europe and the United States are likely to start cutting interest rates, and the downward trend of interest rates will have an impact on asset pricing in the global financial market, and the difference between market expectations and the actual pace of policy implementation will also trigger a wide range of the market**. The U.S. dollar index is expected to decline as a whole, and external pressure on non-U.S. currencies will weaken.
The U.S. monetary policy pivot will push the U.S. dollar index back from its highs, but the pace and magnitude of the downside could fluctuate significantly.
First, the easing of inflation and the inhibitory effect of high interest rates on industrial production and the real estate market have emerged, so that the Federal Reserve will gradually ease its policy and the interest rate cut cycle will begin. The year-on-year growth rate of the U.S. CPI will increase by 67% trend down, December CPI year-on-year growth rate of 34% and core inflation (excluding energy and food**) at 38%, the lowest level in nearly two years. Some economic indicators in the United States have also weakened, with the ISM manufacturing index below the boom and bust line for 14 consecutive months, and the NAHB housing index gradually falling below 40 from above 80 in 2022, indicating that the real estate market is relatively sluggish. Easing inflation combined with downward pressure on the economy will prompt the Fed to pivot to cutting interest rates.
Second, from the perspective of rhythm, there is a deviation between the timing of the Fed's interest rate cut and market expectations, and the game between the two will lead to a wide range of fluctuations in the dollar index. The recently released U.S. non-farm payrolls for January were 3530,000, a new high in nearly a year, the consumer confidence index rose to a nearly two-year high, and the market's expectations for interest rate cuts under economic resilience may be faster than the actual pace of the Fed's operation. The U.S. dollar index is expected to be in a wide range amid the dissynchronization of market rate cut expectations and the Fed's actual operations**.
The risk of recession in the euro area still exists, and the European Central Bank is under greater pressure to turn around, and the possibility of cutting interest rates earlier than the Fed cannot be ruled out, and the euro may be weak**. The Eurozone economy is sluggish, and GDP growth will only turn from negative to positive to 0 in the fourth quarter of 20231%, hovering on the verge of a technical recession, and the manufacturing and service PMIs in January 2024 were below the boom and bust lines for consecutive months. At the same time, the impact of the energy crisis subsided and the service ** fell, inflation in the euro area continued its downward trend, and the year-on-year growth rate of CPI fell to 2 in January8%, there is a possibility of falling back to 2% quickly under the high base effect. The European Central Bank's January interest rate meeting kept monetary policy unchanged but released a marginal ** signal, admitting that it is more likely to start cutting interest rates before the end of the summer of 2024, which is more consistent with market expectations, and generally weighs on the value of the euro.
The Bank of Japan has released a signal to explore the exit of ultra-loose monetary policy, and may raise interest rates 1-2 times this year, and the yen is expected to gradually strengthen. Japan's economy showed signs of improvement, with industrial production rising 1. month-on-month in December 20238% hit the largest increase in half a year, and exports increased by 9% year-on-year8% was the biggest increase in a year, and GDP growth is expected to pick up modestly. At the same time, Japan's CPI has exceeded the 2% target for 21 consecutive months, and the Bank of Japan believes that the trend of wage growth will continue to drive inflation and raise future inflation expectations. With the gradual divergence of monetary policies from the Federal Reserve and the Bank of Japan, the covering of the carry trade will further support the appreciation of the yen.
Gold prices are expected to rise in 2024 and are expected to break through the previous high. The Federal Reserve's interest rate cut has pushed the dollar downward, and the global growth uncertainty has risen due to geopolitical conflicts, rising political uncertainty and downward pressure on the economy, and the demand for gold purchases by major central banks around the world has risen, supported by multiple factors, gold prices will gain momentum in 2024.
First, in terms of monetary policy, the dot plot released by the Fed in December shows that most policymakers expect three rate cuts in 2024, and the market is currently playing around the timing of interest rate cuts. Subsequently, as the market expects to cut interest rates or continue to revise according to the Fed's statement, gold prices may fluctuate periodically, but they cannot change their upward trend, and it is expected that the gold price will be ahead of the start time of interest rate cuts.
Second, in terms of geopolitical and political factors, in 2024, the United States, Russia, the United Kingdom, India and other countries will carry out**, and 2024 will enter the global ** year, involving 76 economies and throughout the year. At present, the global geopolitical landscape is complex and changeable, geopolitical risks occur from time to time, and the Russia-Ukraine conflict and the Palestinian-Israeli conflict are still ongoing.
Third, in the context of "de-dollarization", central banks may continue to increase their holdings**, supporting gold prices, and central bank gold purchases in the first three quarters of 2023 increased by 14% year-on-year3%, or continue this trend in the future. Gold prices are expected to be in a wide range at high levels in 2024**.
The author is a senior commissioner of the Financial Market Department of Agricultural Bank of China, and won the first place in the global market of the 2023 "Vision Cup".