Gold to Hit $2200 & Silver to Sizzle in 2024? ETFs in Focus
Gold and silver are set to log an uptrend in their values in 2024, as per the forecasts by UBS, as quoted on CNBC. This expected increase is largely attributed to the anticipation of the U.S. Federal Reserve cutting interest rates, probably from May. Joni Teves, UBS’s precious metals strategist, highlights that this policy change, coupled with a weaker dollar, is likely to push the price of gold up to $2,200 per ounce by the end of the year. Gold is currently traded at around 2,044.
Inverse Relationship Between Gold Prices and Interest Rates
Gold’s pricing has historically shown an inverse relationship with interest rates. When interest rates fall, gold becomes a more attractive investment compared to bonds and other interest-yielding assets. Additionally, lower interest rates typically result in a weaker dollar, which makes gold cheaper for international buyers as the yellow is normally traded at the greenback, thus increasing gold’s demand.
Federal Reserve's Current Stance and Impact on Gold and Silver
Despite the uncertainty surrounding the exact timing and extent of the rate cuts, UBS remains confident in its projection of the Federal Reserve’s policy easing. This outlook follows the Fed's recent decision to hold rates steady in January and indications that a rate cut is not expected in March. The ongoing geopolitical tensions, particularly the conflict between Israel and Hamas, have also played a role in bolstering gold's appeal as a safe haven asset, leading to its all-time high last month.
Silver's Potential in a Low-Interest Environment
The prospects for silver, often referred to as gold's "poorer cousin," are also looking optimistic in this context. Silver has not typically been a go-to asset for safety in times of geopolitical unrest, unlike gold, but it is expected to perform exceptionally well in the event of Fed’s policy easing. According to Teves, silver could see a dramatic rise, outperforming gold, as it catches up from its previous underperformance.
Industrial Demand and Silver's Economic Health
Silver is often viewed as an industrial metal due to its broad industrial uses, such as in automobile manufacturing, solar panels, jewelry, and electronics. The current market price for silver is $22.69 per ounce. If the Fed cuts rates ahead, the economy will see more activities. This will boost industrial activities as well, thus boosting the demand for silver.
ETFs in Focus
Against this backdrop, below we highlight a few gold and silver bullion ETFs that could be tapped at relatively cheaper valuation. These investments may generate decent gains over the medium term.
SPDR Gold Shares GLD – Down 1.3% YTD
iShares Gold Trust IAU – Down 1.3% YTD
SPDR Gold MiniShares Trust GLDM – Down 1.3% YTD
Invesco DB Precious Metals Fund DBP – Down 1.9% YTD
iShares Silver Trust (SLV) – Down 2.6% YTD
abrdn Physical Silver Shares ETF SIVR – Down 2.6% YTD
The Sprott Physical Silver Trust PSLV – Down 3.5% YTD
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SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
iShares Silver Trust (SLV): ETF Research Reports
abrdn Physical Silver Shares ETF (SIVR): ETF Research Reports
Invesco DB Precious Metals ETF (DBP): ETF Research Reports
Sprott Physical Silver Trust (PSLV): ETF Research Reports
SPDR Gold MiniShares Trust (GLDM): ETF Research Reports
