The gold market maintains its robust stance, hovering close to historic highs and maintaining proximity to the $2,400-per-ounce mark, paralleling the International Monetary Fund’s assessment of a subdued yet steady global economic growth trajectory through 2024.
During its annual Spring meeting in Washington D.C., the IMF unveiled its latest economic projections, indicating a projected global economic expansion of 3.2% for the current year, mirroring the figures of 2023. Advanced economies are anticipated to witness a collective growth rate of 1.7% this year, a marginal uptick from the 1.6% recorded in 2023. Conversely, emerging markets are forecasted to experience a growth rate of 4.2%, slightly down from the 4.3% reported in the preceding year.
Despite the semblance of stability in the 2024 outlook, the IMF underscored that this growth trajectory represents the lowest level witnessed in decades.
“This growth rate falls below the medium-term projection of 3.6 percent forecasted just prior to the onset of the pandemic (as of the January 2020 WEO Update), the 4.9 percent medium-term projection recorded just before the onset of the global financial crisis (as of the April 2008 WEO), and the historical annual average of 3.8 percent for actual global growth spanning from 2000 to 2019,” the IMF stated.
The United States emerges as a standout performer among developed economies this year, with the IMF forecasting a 2.7% expansion in GDP, up from 2.5% in 2023. This upward revision from the January estimate of 2.1% is attributed largely to statistical carryover effects from a stronger-than-anticipated growth outcome in the final quarter of 2023, coupled with expectations of sustained momentum carrying into 2024, as per the IMF’s report.
Canada’s economic outlook appears brighter, with an expected growth rate of 1.8% for the current year, a notable improvement from the 0.8% recorded in 2023. Similarly, the Eurozone is poised for a GDP increase of 1.4% in 2024, a marked improvement from the negligible growth of 0.1% witnessed last year.
Despite encouraging sentiment surrounding the health of the U.S. economy, the gold market remains indifferent. June gold futures recently traded at $2,398.90 per ounce, reflecting a 0.65% increase for the day.
Economists posit that robust economic activity coupled with persistent inflationary pressures will likely compel the Federal Reserve to postpone the commencement of its easing cycle. Market sentiment has already discounted the possibility of a rate cut in June.
However, while rate cuts seem to be on hold, the IMF maintains its outlook for lower interest rates this year. The anticipation of an eventual rate reduction by the Federal Reserve continues to bolster gold prices, according to certain analysts.
“With inflation projected to continue its descent towards targets and longer-term inflation expectations remaining steady, central banks in major advanced economies are generally expected to commence a decline in policy rates in the latter half of 2024,” the IMF affirmed.