Gold is worth more now than ever, but the latest business props suggest the price could be lower come New Year’s Eve.
I’ve got a business proposition for you. No, not that kind – I’m talking about the business props at Bovada (find out more with our Bovada Review). They’ve got a very interesting bet on what the price of gold will be on December 31, 2024:
- Over $2500 (+250)
- $2000 to $2500 (+110)
- Under $2000 (+190)
This is a very timely bet given that gold is at the highest price it’s ever been: US$2,386.32 as we go to press on Tuesday, up nearly 5% from Monday’s close. Judging by these odds (which you’ll find on the entertainment odds board at Bovada), it seems the betting market expects at least some price stability between now and New Year’s Eve – but shading towards the lower side.
So which of these three betting options is the right one? Probably the boring one in the middle, but let’s see what we can find out.
What Do People Think When They Bet?
As a general rule of old-school betting psychology, people like to bet on outcomes they want to see happen – or at least find interesting. I suspect you’ll find plenty of gold bugs out there at the online sportsbooks, putting too much money on Over $2500 and draining the value from those odds.
Under $2000 might also be a bit too attractive to all the bears out there in the market. It’s often the boring choice that hogs all the value, like betting on the draw (especially scoreless draws) in soccer. So right off the bat, let’s hypothesize that $2000 to $2500 is the right choice in this 3-way scenario.
Why Is Gold Going Up?
Mostly because of interest rates. The U.S. Federal Reserve reportedly plans to cut their “Fed Fund” interest rates three times this year; they’ve been holding steady at 5.5% since last July. When interest rates go down, investors move money out of bonds and into other assets, like precious metals.
There’s also a certain amount of fear out there about the U.S. dollar. In times of geopolitical strife, investors flock to “safe haven” assets like gold – and we are certainly living in those times right now.
It’s not just nervous tension, though. The U.S. dollar is still the planet’s leading currency, but central banks across the world are dipping into their USD reserves and using it to buy gold instead. According to Reuters, the People’s Bank of China bought 160,000 ounces of gold in March, marking 17 straight months of purchases. You can’t stop the metal.
Will Gold Keep Going Up?
Some people think so. An April 12 report from Reuters had Goldman Sachs upping their year-end gold forecast from $2300 per ounce to $2700; Carter Worth, at Worth Charting, anticipates a similar climb of around 10% above current prices.
There’s plenty of uncertainty out there, mind you. Those interest rate cuts from the Fed have already been delayed by the unexpectedly high levels of inflation in the Consumer Price Index (CPI) report for March. Now the Chicago Board of Trade appears to expect just two rate cuts instead of three, with an end-year rate of 4.955% judging by their latest data.
At the same time, the March numbers from the Producer Price Index (PPI) show continued signs of disinflation, although not enough to stem the tide just yet; the PPI in March was up 2.1% over the same time last year, higher than February’s 1.6% but less than projected. So maybe that bull run for gold isn’t going to last all the way to December 31.
Will the Price of Gold Fall?
Possibly. In the short term, if the price of gold starts pushing towards $2400, there’s every chance investors will keep plowing ahead towards $2500 – round numbers are like candy for our base-10 brains. But if the price slips back down to $2350, the psychology flips; now you’re looking at the potential for downward pressure towards $2300, maybe even $2200.
Given the geopolitical situation on the ground, and the larger trend for central banks (particularly China’s) to diversify their reserves away from U.S. dollars, it’s harder to envision the price of gold slumping below $2000 by year’s end. Still, would it be too stubborn to stick with our old-school hypothesis and take the boring $2000 to $2500 option at +110?
Good thing we don’t have to pick just one. You could also take Over $2500 at +250 for a smaller sum and lock in a profit no matter which of the two outcomes is the winner. It’s like having both a smoke and a pancake. Bet accordingly.
