For the past few months, investor attention has been almost entirely focused on the fight against inflation and the pace of artificial intelligence. But as fears of soaring prices ease, a new set of risks is on the horizon that could redefine capital flows in 2024. A key question for the technology and financial sectors is becoming whether the gigantic spending on AI will actually deliver the promised returns, or whether investors will begin to seek refuge in traditional assets such as gold.
Michal Stajniak, deputy director of XTB‘s Analytics Department, points to an important paradigm shift. As the excitement over inflation subsides, the market will begin to look more closely at the record debt of global economies and the capital efficiency of AI projects. So far, gold has remained in the shadows, oscillating around $4,500 per ounce, dampened by fears of further interest rate hikes. However, the stabilisation of the macroeconomic situation could signal a rally in bullion towards new highs.
A significant turning point could come on 15 May, when Kevin Warsh takes over the reins at the Federal Reserve. His appointment heralds a more dovish approach to monetary policy. Warsh argues that the development of AI is de facto deflationary, mainly due to labour market optimisation. If the Fed, under his leadership, decides to cut rates, gold will get a powerful boost, becoming an attractive alternative to the dollar.
For the technology industry, this is a cautionary tale. Investors are beginning to lose patience with the narrative of AI’s sheer potential, demanding concrete financial results. If huge investments in infrastructure and processors do not translate into rapid margin expansion, capital may flow away from growth companies towards safe havens.
Stajniak predicts that, in such a scenario, the gold price could easily surpass the USD 5 000 per ounce barrier later this year. A return to historical peaks would then not only be the result of geopolitical tensions, such as attempts at a US-Iran agreement, but primarily the result of a rational flight from the risks emanating from an overvalued tech sector and unstable public finances.
