Gold has long been known as a safe haven and diversifying asset that investors turn to in times of economic and geopolitical distress. Last year was just such a year, with gold drawing the attention of investors of all stripes.
The decision to buy gold proved to be a wise one in 2023. During the year, the precious metal’s price soared to previously unseen heights with a gain of roughly 13%. It finished the year being named one of the best-performing assets of 2023.
In this article, we will explore several of the different factors that contributed to gold’s strong showing in 2023, and what investors can expect from it as we continue to move through 2024.
Why 2023 Was a Good Year For Gold
According to J.P. Morgan, “Gold prices soared to an all-time high of $2,135.39/oz at the end of 2023.” The firm attributed this growth to a weakening U.S. dollar. Additionally, they named the Fed and their decision on interest rates as another factor in gold’s growth.
These weren’t the only factors that helped gold reach its record price in 2023. The World Gold Council reported that “Central bank demand, primarily from EM institutions, was a significant contributor.” The organization estimated that the demand from central banks amounted to 15% of gold’s annual performance.
Additionally, the firm reported that “Emerging market (EM) demand for gold provided not only a ballast to lackluster developed market (DM) activity but also helped drive gold prices to record highs.” Another driving factor was the increased geopolitical risk that dominated the headlines towards the end of the year. Many named it a key contributing factor to gold’s price reaching all-time highs in December of 2023.
Gold’s Expectations for 2024
Looking at what gold can do this year, the current geopolitical uncertainty and ongoing economic unpredictability could potentially continue to boost gold’s performance in 2024. At the very least, central bank demand for the precious metal will likely persist, continuing to drive its performance as it did in 2023.
However according to J.P. Morgan, “Gold prices are expected to dip in the near term before climbing to new highs later in the year, with a forecasted peak of $2,300/oz in 2025.”
Gaining ETF Exposure to Gold
For investors looking to get exposure to gold’s performance going forward, there are several ETFs on the market that track the price of physical gold. Although plenty of physical gold funds are available to investors, ETFs that invest in gold miner equities are another route to consider. The Sprott Gold Miners ETF (SGDM) and the Sprott Junior Gold Miners ETF (SGDJ) both track equity indexes that take a global perspective on gold mining firms.
SGDM follows the Sprott Zacks Gold Miners Index. This index gives investors exposure to large-cap gold mining companies in Canada, South Africa, and the US. SGDJ tracks the Sprott Zacks Junior Gold Miners Index, which covers small-cap gold companies. It currently includes companies from Australia, the U.K., Canada, Indonesia and the U.S.
There were several contributing factors driving gold’s record performance in 2023. Many expect these same factors to remain in play throughout 2024, contributing to the precious metal’s future trajectory.
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