Apr 5 2024: An upgraded gold price forecast for 2024 by Nicky Shiels, head of metals strategy at Swiss gold refinery MKS PAMP, sparked a curious question from market participants this week: “Will gold ‘go cocoa’?”
The surge in cocoa prices, which have more than doubled since the beginning of 2024 due to poor harvests in Ivory Coast and Ghana, prompted comparisons with the gold market’s remarkable performance.
Spot gold, being a more globally recognized and liquid market, reached record highs in five previous trading sessions as investors sought exposure to the metal as a wealth preservation asset.
Gold’s recent record high at $2,305.04 per ounce on Thursday marks a 12% gain since the start of the year.
Shiels commented, “There is almost zero probability that gold can replicate those gains in such a short period.” She emphasized that while cocoa price growth is driven by supply shortages, the gold market benefits from substantial stocks held by individuals and central banks, which collectively own one-fifth of all mined gold.
“One cannot de-stock chocolate bars at the same rate as gold bars,” Shiels remarked, raising her forecast for the 2024 average gold price by $150 to $2,200 per ounce.
Despite technical indicators suggesting the market is overbought and potentially ripe for substantial declines, analysts maintain a bullish stance on gold.
Marex analyst Edward Meir noted, “It is difficult to pinpoint where values will peak as there are no clear resistance ‘signposts’ on the charts.”
Gold’s rally in April, following a 9.3% surge in March, has been impressive even amidst traditional macro headwinds such as a strong dollar and elevated U.S. real interest rates.
Over-the-counter and futures gold markets have seen buoyant activity, with trading volumes estimated to have risen by 40%, according to Johan Palmberg, senior quantitative analyst at the World Gold Council.
Analysts anticipate gold to test new highs once the U.S. Federal Reserve initiates key rate cuts, which could stimulate demand from investors, including holders of physically-backed gold exchange-traded funds (ETFs).
“We had previously projected a $2,400 per ounce price estimate if the Fed cut rates in the first quarter of 2024; we stand by that estimate for this year, even if rate cuts occur later,” noted analysts at BofA in a recent statement.
