Gold among top performing assets in H1 2024, outpaces EM stocks

Gold remains one of the best-performing assets of 2024 at 12% year-to-date return, just behind US stocks at 15.64% while outpacing most major asset classes, according to the latest data shared by the World Gold Council (WGC). Data shows gold trading above US$2,300/oz for most of Q2. Despite high interest rates globally, barring a few exceptions, gold has provided double-digit returns across multiple currencies and a strong US dollar, says the Gold Mid-Year Outlook 2024 report.

It also says that India remains one of the economic bright spots, and China will likely continue to find alternative measures to invigorate growth.

The factors attributed to high returns in gold as an asset class are benefits from continued central bank buying, Asian investment flows, resilient consumer demand, and a steady drumbeat of geopolitical uncertainty. 

However, the key question remains whether gold’s momentum can continue or if it’s running out of steam.  

The WGC says with a few exceptions, the global economy is showing wavering growth indicators – eager for rate cuts – amid lower but still uncomfortable inflation. And the market’s outlook is not too dissimilar.

"The gold price today broadly reflects consensus expectations for the second half of the year. However, things rarely go according to plan. And the global economy, as well as gold, seem to be waiting for a catalyst," the report says.

The WGC says for gold, the catalyst could come from falling rates in developed markets, that attract Western investment flows, as well as continued support from global investors looking to hedge bubbling risks amid a complacent equity market and persistent geopolitical tensions. 

Despite positive sentiments, however, certain fears remain. "Gold’s outlook is, of course, not without risks. A sizable drop in central bank demand or widespread profit-taking from Asian investors could curtail its performance. As it stands, however, global investors continue to benefit from gold’s role in robust asset allocation strategies."

The WGC says the global economy and financial markets are in a transitional period. "Bond yields have moved generally sideways as Western central banks have kept policy rates on hold. But pressure is mounting on policymakers as they balance lower but stubborn inflation and signs of cooling labour markets."

In its outlook, WGC says its analysis suggests gold may continue to move in a similar range to what's seen in recent months. "In other words, after gaining good momentum in the first half of the year, current market trends indicate a rangebound performance from its current levels during H2."

It says since gold is already up by more than 10% -- and consensus suggests a similar result for the full year --  the asset can perform well even when rates remain as expected.