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This week I attended the LBMA’s Global Precious Metals conference in Barcelona. As usual it was a flurry of activity and discussion between cross sections of those involved in precious metals. At the end of the conference attendees are asked to give their forecasts for the precious metals markets, for the next 12 months. 

Early reports indicate that attendees expect gold to outperform amongst the precious metals, reaching $1,990.30 an ounce by October 2024. 

The outlook for silver was also pretty bullish. At the time of writing silver is sitting around $23. LBMA conference participants expect to see this climb to $26.80 by this time next year. 

We suspect much of this bullishness is on account of events in the Middle East. Gold has climbed by over 5% since the violence began. Prior to that it had been at its lowest since March. 

Next year will be an interesting one in terms of gold drivers, and some market participants may have to pivot themselves somewhat in terms of what to pay attention to. This year (and years prior) all eyes have been on the FOMC decisions, US dollar strength, and of course Treasury yields. Next year we expect the gold market to pay less attention to these factors. After all, the FOMC isn’t expected to move much, and already gold is barely blinking when US data releases are positive (see today’s labour numbers).

Instead, more weight will be placed on safe haven demand and physical demand. This isn’t just in relation to war but also in economies where citizens have a natural affiliation to gold investment and perhaps aren’t performing as well elsewhere. We’re of course thinking about China, in particular. The Shanghai Premium is something we have discussed recently, this is a good indication of a divergence happening in the gold market. 

Buy Silver, For The Sake Of The Planet

Silver is, of course, also a safe haven and we expect it will do well on the back of this, just like gold. But we are especially excited about it because of its industrial properties. The global transition to green energy is providing solid support for silver prices. 

For a long time, there have been concerns about supply shortages. Unlike the PGM metals, there is no option for substitution. So, there could be a real stock issue if more silver supply is not found. It is estimated that another 2 or 3 mines will need to open in order to satisfy projected solar demand. Failing this, above-ground stocks will need to be used. In both cases the current price does not make either option especially attractive, so watch this space to see climbs in the silver price. 

JP Morgan Would Be Proud

LBMA participants are not the only ones getting ready to stock up on gold. JP Morgan’s Chief Market Strategist Marko Kolanovic is also set to. In the bank’s Global Markets Strategy report, Kolanovic explained that the continued escalation of geopolitical dangers and the overvaluation of equity markets in the United States and elsewhere made this an opportune moment for investors to boost their gold exposure.

The investment bank will be maintaining a“ defensive allocation in our model portfolio…We additionally increase our allocation within commodities to gold, both as a geopolitical hedge, and given an expected retracement in real bond yields.”

This would no doubt delight the organization’s founder who purportedly said before Congress in 1912, “Gold is money. Everything else is credit.” 

If you’re interested to know how bullish Kalanovic is on gold, JP Morgan is projecting spot gold prices to reach $2,175 by Q4 2024. 

More to come?

It’s not even Thanksgiving yet so expect more forecasts in the coming weeks. Of course, in some ways they should be taken as a pinch of salt as no one can predict the future. No one expected the Middle East violence to pick up like it did, when it did, for example. But forecasts are a great way to pick up on the sentiment surrounding gold – why do industry professionals think people buy gold, why do they buy gold. It can give you a good feeling for how these same people will react when the unexpected happens. And, as we know, something unexpected always happens and that’s when gold shines. 

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