Nicholas Frappell, global head of institutional markets at ABC Refinery, discussed the factors he sees moving the gold price in 2024, including the US Federal Reserve, the dollar, central bank buying and real interest rates.
Speaking at the Prospectors & Developers Association of Canada (PDAC) convention, he said the market may be misreading the Fed's seriousness about driving inflation lower — he expects rates to stay "somewhat higher for longer."
When asked if the American central bank can achieve a soft landing, Frappell said he's inclined to say yes.
"There's so many events that are completely outside the Fed's control and completely outside our control. Those things could intervene and provide shocks to the economy that we can't know," he said. "But if you look in 2024, it does look so far so good, which is not at all what — a lot of people are pretty pessimistic about that. I'm neutral to mildly optimistic."
Looking at the dollar, Frappell said he has a mildly positive outlook for this year. Acknowledging that many credible sources believe the dollar is 10 or 12 percent overvalued versus its peers, he said that doesn't mean it will turn any time soon.
While dollar strength implies a headwind for gold, Frappell said buying from central banks is likely to provide support.
"I would not be surprised to see a repeat of the last two years in a numbers and tonnage sense," he said.
Frappell also shared potential gold price targets for the coming year, mentioning US$2,360 and US$2,580 per ounce.
"Trying to put some kind of context on a possible 'when' — I look at the options market and I try and say, 'Okay, what are those strikes looking like in terms of the options delta?' Because in reverse that gives you an idea of what the market's pricing in term of probability," he explained. "Looking at it for the nine month expiration, which takes us really to December, I think for US$2,360 that target is roughly ... one in four or thereabouts. And then for one year it's higher."
He described US$2,580 as a "much lower probability outcome," saying it's more like one in eight.
Watch the interview above for more from Frappell on the gold market, including his take on the topic of manipulation. You can also click here for the Investing News Network's full PDAC playlist on YouTube.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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