According to an article on the precious metals website Kitco, the gold market's recent record high above 2,400 US dollars/ounce may represent a peak. Investors should not expect much room to fall from current levels, however, as the World Bank believes that gold will rise by 8% this year.

The World Bank stated in its “2024 Commodity Market Outlook” that it believes that the average price of gold is around 2,100 US dollars/ounce. The price of gold rose 4% in the first quarter of this year and has risen sharply since then. The international financial institution also said that the possibility that gold prices will rise higher this year is not ruled out.

Analysts said in the report: “Increased uncertainty brought about by the current escalation of conflict and broader geopolitical tension may push the price of gold above the benchmark. In the face of heightened geopolitical and policy uncertainty, safe-haven demand for gold will increase further in 2024, which is partly related to the large number of upcoming elections around the world.”

Although the price of gold showed some solid selling pressure after hitting an all-time high of more than $2,400, its consolidation was quite small compared to the breakthrough rebound of the past two months. The World Bank notes that geopolitical safe-haven needs will continue to help the gold market escape strong negative correlation with rising bond yields. US Treasury yields have risen sharply since the beginning of this year as the market delayed expectations of the Federal Reserve's interest rate cut.

Rising inflationary pressure forced the Federal Reserve to maintain a restrictive monetary policy longer than expected. The World Bank notes that commodity price inflation is likely to increase this year, creating a challenging environment for all central banks. In short, the effect of cooling inflation brought about by falling commodity prices seems to have largely come to an end.

World Bank analysts said, “Despite weak global GDP growth, commodity prices have continued to rise compared to pre-COVID-19 levels, which shows that several forces are at play: geopolitical tensions are driving up prices, and investments linked to the clean energy transition are boosting demand for metals...”

Commodity prices face upward risks, the report said. Analysts said, “The rise in commodity prices due to the conflict may exacerbate stubbornly high global inflation and further delay global monetary easing. Food insecurity worsened markedly last year, reflecting armed conflict and rising food prices, and this situation is likely to increase further.”

Some analysts have indicated that the environment described by the World Bank will have a positive impact on the gold market. Although central banks may have to postpone interest rate cuts this year, interest rates are not expected to rise. If inflation starts to rise, this will drive real yields down and create a favorable environment for gold. At the same time, any rise in geopolitical uncertainty will further drive safe-haven demand for gold.

Although prices have repeatedly reached new highs, investors have largely ignored precious metals. The World Bank notes that growing demand from central banks still provides strong support for gold. Although the World Bank expects its commodity price index to fall 3% this year and 4% next year, prices are still expected to be well above the historical average. While optimistic about gold, the World Bank also believes that the price of silver will rise this year; however, it is expected that the performance of silver will still be inferior to that of gold.

According to the World Bank, the average price of silver this year is around 25 US dollars/ounce, which is 7% higher than last year. Analysts said that the biggest risk facing silver remains the health of the global economy. Analysts said, “Demand for silver is expected to grow slightly in 2024, driven by the dual appeal of silver as a financial asset and an industrial commodity. Industrial demand, which accounts for nearly half of global silver consumption, will continue to be supported by automotive electrification and expanding renewable energy infrastructure. Industrial activity in major economies was weaker than expected, which could dampen demand for silver and platinum.”

However, the World Bank believes that silver will outperform gold in 2025. The price of silver is expected to rise by about 4% next year, and the price of gold will remain relatively stable.