Precious metals, including gold and silver, experienced significant gains throughout 2023, driven by factors such as soaring inflation and escalating geo-political risks worldwide. As we move into 2024, the market outlook for these valuable commodities is expected to be influenced by a variety of geo-political events, central bank actions, fluctuations in the Dollar Index, and changes in US yields.
Key Factors Influencing Market Movements
- Central Bank Actions: A phase of aggressive interest rate hikes by central banks globally, amounting to approximately 1,700 basis points since the previous year, has set the stage for a potential shift in overall stance. Signals from the Federal Reserve, especially after the December 2023 policy meeting, indicate a possible pivot with expected rate cuts in 2024.
- Geo-political Tensions: Ongoing events like the Russia-Ukraine war and the Israel-Hamas conflict have consistently heightened the risk premium for safe-haven assets, impacting the prices of gold and silver. Uncertainties arising from geo-political events are expected to continue influencing market dynamics in 2024.
Market Outlook for Base Metals
The conclusion of 2023 brought challenges to the commodity markets, driven by global economic factors. Setbacks in China’s economic revival, central bank tightening, and a stronger US dollar contributed to headwinds faced by base metals.
Challenges and Opportunities in Base Metal Markets
- China’s Economic Performance: Setbacks in China’s economic revival, particularly in the property sector, contributed to an unexpected downturn in base metals by the end of the year.
- Global Monetary Tightening: Central bank tightening and a stronger US dollar intensified challenges for the commodities market.
Navigating the Year Ahead
As we look ahead to 2024, expectations for base metal markets include navigating between smaller surpluses and deficits, contingent on demand dynamics. While short-term fluctuations are anticipated, supportive fundamentals, persistent geopolitical risks, and anticipations of easing measures by the Federal Reserve collectively suggest the possibility of a positive upside for the metal basket in the upcoming year.
