An upward revision in the gold price forecast for 2024 by Nicky Shiels, the head of metals strategy at Swiss gold refinery MKS PAMP, prompted an intriguing question among market participants this week: “Will or can gold ‘go cocoa’?”
The surge in cocoa prices, more than doubling since the beginning of 2024 due to unfavorable harvests in Ivory Coast and Ghana, has captured attention alongside the remarkable performance of spot gold (XAU=). The global and highly liquid gold market has witnessed record highs in five recent trading sessions as investors seek exposure to this precious metal known for its wealth preservation attributes.
Gold achieved a new pinnacle at $2,305.04 per ounce on Thursday, marking a 12% increase since the year commenced. Despite this remarkable ascent, Shiels expressed skepticism about the possibility of gold replicating such rapid gains within a short timeframe.
While cocoa price spikes are fueled by supply constraints, the gold market enjoys a degree of protection due to substantial stocks held by individuals and central bank reserves, which account for one-fifth of all gold ever mined.
Shiels highlighted the contrasting dynamics between de-stocking chocolate bars and gold bars, underscoring the inherent differences in market behavior. Consequently, her 2024 average gold price forecast was revised upwards by $150 to $2,200 per ounce.
Despite the potential for the market to experience significant corrections given its overbought status, analysts maintain a bullish stance on gold. Edward Meir, an analyst at Marex, noted the absence of clear resistance levels on the charts, making it challenging to predict where values may peak.
While the market may not precisely emulate the cocoa market’s trajectory, the prevailing optimism surrounding gold’s outlook persists amidst the backdrop of rapid price appreciation and investor interest.