GOLD, SILVER

GOLD, SILVER
FORECAST:
FORECAST:
Q1, 2024
Q1, 2024
RICHARD SNOW, STRATEGIST
RICHARD SNOW, STRATEGIST
GOLD, SILVER FORECAST: Q1, 2024

DailyFX Research Team

Table of Contents
Gold, Silver Q1 Forecast: Fundamental Drivers Align but Real Rates Pose a Threat ........................3

Gold Review in a Year of Conflicts and Banking Stress ....................................................................... 3

Weaker USD and Declining Treasury Yields to Support Gold/Silver .................................................... 3

Gold’s Allure as a Safe Haven May Add to Existing Tailwinds ............................................................ 5

Real Yields May Pose a Risk to the Outlook .......................................................................................... 5

Gold, Silver Q1 Technical Forecast .................................................................................................6

Patience Required Ahead of Bullish Continuation ................................................................................ 6

Silver Appears Less Responsive to Bullish Sentiment Ahead of Q1 ................................................... 7

Disclaimer ......................................................................................................................................8

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GOLD, SILVER FORECAST: Q1, 2024

DailyFX Research Team

Gold, Silver Q1 Forecast: Fundamental Drivers Align

but Real Rates Pose a Threat

Gold Review in a Year of Conflicts and Banking Stress

Gold showed just how volatile it can be throughout 2023. The precious metal declined as the dollar
and Treasury yields rose in Q3 but reversed course in Q4 when the greenback and yields turned
sharply lower. Gold also revealed its allure as a safe-haven asset during the banking turmoil in March
as well as the early days of the Israel-Hamas war, seeing the commodity eventually obliterate the
previous all-time-high.

Expectations heading into Q1 2024 is for US growth to moderate and for inflation to record further
progress, putting pressure on the Fed to cut elevated interest rates. Overall, the fundamental
landscape favours bullish potential or at the very least, appears supportive of precious metals.

Weaker USD and Declining Treasury Yields to Support

Gold/Silver
Silver and gold tend to move in the same direction and respond to similar
developments/fundamentals hence, the remainder of this article delves into topics that relate to both
precious metals.

Gold inherently has an inverse relationship with US Treasury yields as well as the US dollar. When the
dollar weakens this stimulates gold purchases for foreign buyers and since gold offers no yield, the
metal gains in attractiveness whenever yields drop as the opportunity cost for holding gold declines.

Despite the Fed maintaining the possibility of another rate hike, markets have decided that the
pathway for the Fed funds rate is to the downside. This is portrayed via the sharp drop in Treasury
yields and the subsequent move lower in the dollar but also derived from implied rate cut probabilities
from the Fed funds futures market. The chart below reveals how far gold prices have risen while USD
and yields have fallen. Therefore, even if gold prices were to stall, the lower trend in yields and USD
are likely to keep XAU/USD prices supported at the very least.

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GOLD, SILVER FORECAST: Q1, 2024

DailyFX Research Team

Spot Gold Price (gold line) with DXY (green) and US 10-Year Yield (blue) Overlayed

Source: TradingView, Prepared by Richard Snow

The broader commodity complex is showing signs of recovery after months of a general decline. A
lower US dollar and the prospect of interest rates being drawn back faster than the Fed anticipated,
has provided a lift for the sector. This is according to the Bloomberg Commodity Index which is a
broadly diversified index distributed by Bloomberg tracking futures contracts on physical
commodities. The combined weighting of gold and silver prices constitutes around 20% of the index
meaning precious metal prices maintain a notable representation within the overall calculation.

Bloomberg Commodity Index 2023 Showing Early Signs of a Recovery

Source: Refinitiv, Bloomberg, Prepared by Richard Snow

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GOLD, SILVER FORECAST: Q1, 2024

DailyFX Research Team

Gold’s Allure as a Safe Haven May Add to Existing Tailwinds

We saw in March and early October how sensitive gold is to systemic and geopolitical threats. In
March there was the very real possibility of a banking crisis and in October the conflict surrounding
Israel and Hamas resulted in war. In 2024 market participants will need to keep tabs on developments
between China and Taiwan but also the growing tensions between North Korea and Japan, South
Korea and the US.

Real Yields May Pose a Risk to the Outlook

One of the risks to a bullish outlook for gold throughout Q1 is the prospect that the Fed funds rate
remains above 5% while inflation heads lower. Such an outcome raises real yields (nominal interest
rate – inflation), which could draw capital away from the non-yielding gold and silver in favour of
money market alternatives.

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GOLD, SILVER FORECAST: Q1, 2024

DailyFX Research Team

Gold, Silver Q1 Technical Forecast

Patience Required Ahead of Bullish Continuation

From a technical standpoint the bullish outlook on gold is a little more complicated than the
fundamental thesis suggests. A lot of positive momentum has already been priced in, providing a less
impressive risk-to-reward ratio.

It is with this in mind that an extended pullback would be favourable prior to assessing bullish
continuation setups. The first level of support that could provide a springboard for gold is the zone
around $2010, with a deeper pullback highlighting $1956. The medium-term uptrend has provided
notable periods where gold prices cooled before continuing higher and therefore, it would be
reasonable to foresee the potential for another pullback developing in Q1 of 2024.

To the upside, levels of interest appear at $2075 and if price action can muster up enough momentum,
a retest of the new all-time-high of $2146.79 appears as the next level of resistance. This trade idea
requires discipline to wait for a better entry into what remains a bullish trend.

Gold (XAU/USD) Weekly Chart

Source: TradingView, Prepared by Richard Snow

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GOLD, SILVER FORECAST: Q1, 2024

DailyFX Research Team

Silver Appears Less Responsive to Bullish Sentiment Ahead

of Q1
Silver, unlike gold, failed to register a new all-time-high and even missed out on printing a new yearly
high. As such silver plays the part of the laggard when assessing the likelihood of a bullish advance
in the first quarter of 2024.

Silver broke out of the prior descending channel only to drop back within it again and as 2023 draws
to a close, another upside breakout appears on the cards trading around the 50% Fibonacci
retracement of the major 2021 to 2022 decline at $23.85.

As with gold, a pullback would offer a better entry level, highlighting the 38.2% Fibonacci retracement
level of $22.35 or even $21.43 as potential launchpads for a move higher.

The prior level of resistance at $25.00 flat provides one potential key level to the upside with $26.10
having capped weekly prices throughout 2023. The $25 level has also come into play, halting bulls at
the back end of 2021 and in September this year.

Weekly Silver (XAG/USD) Chart

Source: TradingView, Prepared by Richard Snow

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GOLD, SILVER FORECAST: Q1, 2024

DailyFX Research Team

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