PETALING JAYA: The anticipated retreat in the US dollar and interest rates in 2024 will be key positive drivers for gold, while concerns on overall adherence to the production cuts will likely lead to higher crude oil prices (CPO).
“We keep our positive view for gold for a sustained move above US$2,000 per ounce.
“While sovereign demand for gold remains strong from Asia and emerging-market central banks, gold investments from retail investors are only just starting to bottom,” UOB Kay Hian Research said in its first-quarter 2024 (1Q24) outlook report.
“Specifically, exchange-traded fund or ETF holdings in gold appear to have bottomed at the year’s low.
“This should bode well for gold as retail interest returns. Over the long run, gold remains a key portfolio diversifier of risk,” it added.
The Singapore-based research firm has revised its forecast for gold to US$2,050 per ounce in 1Q24, US$2,100 per ounce in 2Q24, US$2,150 per ounce in 3Q24 and US$2,200 per ounce in 4Q24.
As for CPO, UOB Kay Hian Research said the December Organisation of the Petroleum Exporting Countries meeting ended with a fair amount of confusion.
“While the group claimed to commit to an additional 2.2 million barrels per day (bpd) of production cuts, full details of individual country quotas were lacking. Saudi Arabia did extend its one million bpd production cut to end 1Q24, while Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman also joined with their additional cuts.
“But there remains confusion over the distribution of the rest of the production cuts and this raised concerns on overall adherence to the production cuts.
“As such, we maintain our positive outlook for Brent crude oil, but adjust our positive price forecasts to more modest levels of US$85 per barrel in 1Q24 and 2Q24 and US$90 per barrel in 3Q24 and 4Q24,” it said.
However, it maintained a negative outlook for London Metal Exchange copper following weak construction demand from China, and the risk of increasing surplus in refined balance in the months ahead as flagged by the International Copper Study Group.
“The sharp retreat in ‘three months vs cash’ spread into a deeper discount is worrying and symptomatic of weak near-term demand. Our updated forecasts for LME Copper are US$8,000 per tonne in 1Q24 and 2Q24 and US$7,000 per tonne in 3Q24 and 4Q24,” the research house added.
