Gold Prices as 2024 Begins

The year 2023 ended up being pretty solid for gold. The price was higher in all major currencies, and in dollar terms, price finished 2023 on the verge of a breakout from its three-year consolidation pattern. 

We'll get into a more detailed forecast next week in our annual "macrocast". There's a lot to consider as we look ahead to 2024, and a forecast for the year will require a detailed examination of all the factors that will drive precious metals prices in the months to come. For today, let's take one more look at where gold finished 2023 and begin to assess where it might head in the early stages of 2024.

Gold Prices

First of all, despite all the headwinds from rising interest rates and a U.S. dollar index that had occasional bouts of sharp rallies, gold finished the year with a 13.1% gain, rising from $1824 to $2063.

Gold Daily Candelstick Chart (January 2023 - December 2023)

On the longer-term chart, spot gold finished 2023 with an all-time high close on the monthly and quarterly charts. You can also see price breaking out of that 3+ year consolidation phase I mentioned earlier.

Gold Monthly Nearest Candlestick Chart (2009-2023)

You don't usually see annual candlestick charts, but here's one I found on Twitter/X. These longer-term charts are what get the attention of the hedge funds and institutions, and on the chart below, you can plainly see a more concise version of the cup-and-handle pattern that has so many gold investors all excited for 2024.

Gold 12-Month Candlestick Chart (1998-2023)

Speaking of being excited, here's another chart I found on Twitter/X. I'll pause here a minute to allow you some time to consider it...

Gold Continuous Contract Chart 12-Year Consolidations

US Market

OK, so while that's all very nice and great fun, it's also yesterday's news. The new year has begun, and we are fully in the fire as the first week of 2024 begins. It's going to be a very busy week, full of important economic datapoints, the most important of which will be the latest update on the job market in the U.S. on Friday. 

As we go through the week, the key to the gold price will be the trading of the U.S. dollar index in reaction to the news. The index has been in a steady downtrend since October, but it has recently met our target of 101. Will it now bounce, rally, and consolidate or will it extend even further downward, toward the lows of mid-July? Correctly answer that question and you'll have an idea as to where the gold price is headed in the short term.

US Dollar Index Chart (January 2023 - December 2023)

2024 Fed Rate Cuts

My greater concern as 2024 begins is the notion that "the market" has gotten too far ahead of itself in terms of rate cut expectations. While the U.S. economy continues to slow—and while we have no idea what disasters await in 2024—the idea that the Fed will cut the fed funds rate as many as seven or eight times this year seems a little far-fetched and generous. 

FED Meeting Probabilities for 2024 Fed Fund Rate Cuts

Given what we know as 2024 begins, something like three to five rate cuts seems more reasonable, in a path similar to what is shown below.

Market Expectations for Fed Funds Rate (December 2023 - December 2025)

Conclusion

So, putting it all together, if I'm correct about these two notions…

1.           that the dollar index is near a short term low and ready to bounce and rally

2.           that rate cut expectations have gone too far

...then precious metal prices are going to deal with some headwinds in the first quarter of the new year. Prices may not decline too much, but they may not rally too much either. That price breakout we're all anticipating is still forthcoming, but perhaps not quite as soon as many hope or expect.

Again, we'll get more into all this long-term forecasting stuff with our annual "macrocast" next week. For now, just keep an eye on the headlines and then check to see what the reaction is in the dollar index. From there, you'll know whether or not the gold price will begin 2024 with a green candle on the weekly chart.