Several factors could potentially affect the price of — and demand for — physical gold over the course of the the coming year.

Mining activity, for instance, contributes to the available supply of gold and can be affected by political conflict in regions where significant amounts of gold are extracted.

In 2022, China was the largest gold producer, according to the World Gold Council, accounting for 375 tons, approximately 10% of global output — followed by Russia, which produced approximately 325 tons. But as of November 2023, Russia remains at war with Ukraine.

“Gold is being mined in more remote parts of the world that are often politically and economically unstable; that makes gold harder to find and more expensive to mine,” says U.S. Money Reserve President Philip N. Diehl, who served as 35th Director of the United States Mint. “That means newly mined gold must draw a higher price to cover those higher costs. That is driving a long-term increase in gold prices and will continue to do so.”

How the Federal Reserve’s Federal Open Market Committee (FOMC) approaches interest rates could also impact gold prices in 2024.

The increases the FOMC made to the target range for the federal funds rate in 2022 and 2023 have helped strengthen the U.S. dollar, Diehl says. And because gold is sold around the world in U.S. dollars, a move in the opposite direction may lift the precious metal’s selling price.

“A strong dollar like we have today makes gold expensive for buyers using other currencies, and that puts a temporary cap on foreign demand,” he says. When people begin to expect the Fed to lower interest rates, we’ll see the dollar weaken and a bigger breakout in gold prices.”

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