An upgraded gold value forecast for 2024 from Nicky Shiels, head of metals technique at Swiss gold refinery MKS PAMP, drew an sudden follow-up query this week from market contributors. The enquiry was: “Will or can gold ‘go cocoa’?”
Cocoa costs have greater than doubled because the begin of 2024 as a result of poor harvests in Ivory Coast and Ghana.
In the meantime, spot gold , a way more world and liquid market, hit file highs on 5 earlier buying and selling classes as traders jumped in in search of publicity to the steel used to protect wealth.
Gold’s file excessive at $2,305.04 an oz hit on Thursday quantities to a acquire of 12% because the begin of the yr.
“There may be nearly zero chance gold can replicate these features in that period of time,” Shiels mentioned.
Whereas cocoa value development is pushed by provide scarcity, the gold market is protected by important shares held by people and reserves of central banks, which personal one-fifth of all of the gold ever mined.
“One can not de-stock chocolate bars on the identical fee as one can de-stock gold bars,” she mentioned. Her forecast for the 2024 common gold value was raised by $150 to $2,200 an oz.
Nonetheless, whereas the market might not precisely “go cocoa”, analysts retain a bullish tone at the same time as technically the market feels ripe for hefty falls as a result of it being overbought.
“It’s arduous to say the place values are going to high out as there are not any resistance “signposts” on the charts,” mentioned Marex analyst, Edward Meir.
Gold’s April rally got here on high of its 9.3% leap in March, the strongest since July 2020, which unfolded regardless of conventional macro headwinds akin to a robust greenback and elevated U.S. actual rates of interest.
Over-the-counter and futures gold markets have been buoyant, with an estimated 40% rise in buying and selling volumes, mentioned Johan Palmberg, senior quantitative analyst on the World Gold Council.
“And there may be outsized exercise within the gold choices market, as compared with the likes of equities and bonds, which means that the present curiosity is particularly in gold.”
Additional out, many analysts count on gold to check new highs as soon as the U.S. Federal Reserve begins chopping key charges triggering demand from traders sitting on the sidelines akin to holders of physically-backed gold trade traded funds (ETFs).
“We had beforehand proposed a $2,400 per ounce value estimate if the Fed minimize charges within the first quarter of 2024; we decide to that estimate for this yr, even when fee cuts come later,” analysts at BofA mentioned in a notice.