Gold to Take Hit if U.S. Economy Has Soft Landing, But Risks Remain, WGC Says
Gold prices are likely to take a hit if the U.S. economy achieves a so-called soft landing in 2024 and avoids a recession, despite rising inflation and interest rates this year, according to the World Gold Council. In its 2024 gold outlook, the industry body said the market is currently anticipating a soft landing for the U.S.
economy—in which inflation falls without any significant negative side effects—which should boost the global economy with it. Based on past data, soft landings generally haven’t benefited gold, with prices either holding flat or falling. However, the WGC isn’t confident that a soft landing is inevitable and says a mild recession is still very much in the cards.
“It’s not going to be a straight line," John Reade, chief market strategist at the WGC, said in a call. “Parts of the year will see faster U.S. economic growth and weaker U.S.
economic growth." The strongest outlook for gold would be a mild recession in the U.S., with investors driving to the precious metal as a haven, Reade said. However, gold will likely rise when the Federal Reserve cuts interest rates, he said. “It’s a reflection of how important U.S.
monetary policy and the U.S. economic outlook is to gold," Reade said. “The speed and timing [of rate cuts] is uncertain but as long as they come down, gold will be OK." Prices recently hit a record high as traders rushed toward the yellow metal on the prospect of earlier-than-expected rate cuts from the Federal Reserve.
A weaker dollar has also helped gold, with prices closing on Wednesday at $2,047.90, up nearly 10% this quarter. The market currently is pricing in roughly five interest-rate cuts for next year, according to Reade. Investors will likely be able to position for gold when the
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