US elections and more: 6 geopolitical events that will impact gold prices in 2024

Gold prices hovered near a record high on Thursday, fueled by anticipation of a potential interest rate cut by the Federal Reserve in September. This follows recent developments that have bolstered expectations of monetary easing.

During the Federal Reserve’s July 30-31 meeting, several officials considered the possibility of cutting interest rates, though the central bank ultimately decided to keep them steady. However, the discussion has led swap traders to predict a quarter-point rate cut next month, with a 20 percent chance of a more significant half-point reduction.

“Gold prices extended gains on Wednesday, nearing record highs after the U.S. Federal Reserve’s July meeting minutes revealed a strong inclination towards an interest rate cut in September. Most policymakers indicated that easing policy would be appropriate if data aligned with expectations. The Fed minutes led to a weaker dollar, which dropped to a seven-month low, and a dip in U.S. 10-year bond yields to a two-week low. Investors are now keenly awaiting Fed Chair Jerome Powell’s address at the upcoming Jackson Hole symposium,” said Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One.

Mallya expects Gold to trade higher as anticipation builds for Fed Chair Jerome Powell’s speech at the Jackson Hole symposium amidst a weaker dollar and lower bond yields.

Apart from US Fed, other geopolitical events also have a profound influence on financial markets, including the gold market. With several critical events unfolding and more expected by the end of the year, experts at The Gold Bullion Company have highlighted potential impacts on gold prices, in a recent report. 

Here’s what to watch for:

1. Tensions in the Middle East

The October 7th events saw gold prices surge to record highs as investors sought stability in the face of escalating violence in the Middle East. With no resolution in sight, especially as the first anniversary of Hamas’ invasion of Israel approaches, any further conflict is likely to increase demand for gold, driving prices even higher, said the report.

The upcoming November 2024 US election is another key event. Historically, election outcomes haven’t drastically shifted gold prices immediately, but the broader economic, trade, and diplomatic policies of the new president could trigger fluctuations. Given the global influence of the US, the election, coupled with other geopolitical uncertainties, is likely to boost gold demand.

Now in its third year, the Ukraine-Russia war continues to create economic instability. Recent advances by Ukraine into Russian territory could signal a shift in the conflict. Any escalation, particularly involving more sanctions or market turbulence, could see investors flocking to gold as a safe haven, pushing prices up.

China’s increased gold reserves have sparked concerns that it is preparing for a potential conflict with Taiwan. Any rise in tensions or conflict could have significant global economic repercussions, leading to higher gold prices as investors seek protection against uncertainty.

BRICS nations have been major buyers of gold since 2022, and their upcoming October summit will focus on economic, social, and geopolitical issues. This could challenge the dollar’s dominance, with BRICS potentially using gold and oil to undermine the dollar’s status as the world’s reserve currency, impacting gold prices globally.

6. Climate-Related Disasters

Climate change is increasingly linked to gold market dynamics. Many gold-producing countries are also among those most vulnerable to environmental disasters. Any disruptions in gold supply due to climate-related events would likely result in a surge in prices.

Rick Kanda, Managing Director at The Gold Bullion Company, advises that understanding the global landscape is crucial before investing in commodities like gold. “Investing in anything, whether it’s gold or crypto, requires extensive research and awareness of geopolitical events that could affect markets,” he notes. Before making investment decisions, it’s essential to consider how these events might impact the commodities market.