Gold’s 2024 price ceiling is now the floor, silver is approaching ‘sweet spot’ for investors – MKS Pamp

The first quarter of 2024 was all about gold, according to an updated outlook from MKS Pamp. “We were not bullish enough Gold in Q1’24 and were too bullish Silver and Platinum,” the analysts said, “but the relative outperformance between Gold and the white metals (Silver & PGMs) should compress in Q2’24 & Q3’24.”

In their recently published Precious Metals Outlook 2024 – Revised Forecasts, the Swiss precious metals giant broke down the sector’s performance in detail, and laid out their adjusted predictions for the remainder of the year.

The analysts wrote that gold has shown sensitivity to central banks’ tolerance of higher rates to address sticky inflation.

“Original Forecast $2050/oz (mildly bullish vs the street) is now upgraded to $2200/oz (outright bullish) as Gold sniffs out a collective turn in major CB policy willing to accept higher for long inflation, amidst solid physical demand,” they wrote. “Our original 2024 forecast published in January was $2050/oz (high-low range of $1900-$2200/oz), hinging on the Fed cutting rates as the global economy slowed. We also expected new all-time highs. So far Gold has already taken out our high price forecast of $2200/oz with the timing as expected as Gold preempts a Fed rate cutting cycle, while Central Bank and physical demand remains relentless.”

They noted that one of their bull cases was based on “Asian or CB physical demand being stronger than expected” and this “has played out (earlier than expected) and is the game changing development behind higher [price] floors.”

Among the factors that did not align with their original forecasts were interest rate cuts being pushed further back while the U.S. economy continued to outperform. “We also expected an underinvested investor community to subscribe in a meaningful way and drive the price rerating which has not been the case (so far),” they said. “We did not expect the emergence of an accelerated physical purchasing program” driven by runaway Chinese demand, which has propelled “shallower dips and a persistent rally that has not been short-lived as in the past 4 peaks seen post-COVID.”

They also pointed out that “both producer-related and secondary supply has not reengaged (as expected) at price peaks, and that lack of structural selling has allowed Gold to float higher.”

The updated forecasts now have gold averaging $2,200 per ounce in 2024, with a new higher floor of $2,000. “We also now expect Gold to print bull market gains in 2024 that is emblematic of past rate cutting cycles; that equates to $2475/oz (and almost $2600/oz if one accounts for the annual cost of carry,” they wrote.

Among the risks to their updated bullish forecasts, MKS Pamp notes that now everyone is bullish. “Banks are revising up forecasts and consensus for Gold has shifted in one direction,” they said, but offered the caveat that market positioning is not yet reflecting this. “Western investor positioning still remains underweight on a long-term historical Gold basis, vs the liquidity & holdings in other asset classes and commodities remain undersubscribed as an asset class.”

Other threats include “large Gold holders (including Central Banks) monetizing Gold if 1) they are forced to (eg: the financing of hot & cold wars), 2) Gold loses appeal as a geopolitical or inflation hedge and/or 3) Gold comes under direct sanction and policy risk,” as well as the potential for “strong secondary physical sales from retail coin & bar holders, globally, which has not been ignited.”

Turning to silver, the analysts wrote that a sweet spot is beginning to emerge, but investor demand must increase to get it there.

“Silver continues to have an attractive micro/fundamental story heading into a collective Central Bank rate cutting cycle (as is the case with Copper and to a lesser degree Platinum),” they said. “The market understands the structural supply challenges in these cyclical transition metals, but the demand story isn’t materializing the way bulls think it should, including investment demand which remains static.”

The analysts acknowledged that investors don’t have the patience to eat monthly losses as they wait for moves in a high interest rate environment, which helps to explain why silver and the PGMs are so under owned, but supply constraints will still push prices higher.

“Silver moved into a structural deficit in 2021 driven largely by energy-related industry demand (PV, auto etc) and has posted deficits averaging ~250mn oz the past 3 years including 2024,” they wrote. “While above ground stocks have managed to fulfill those annual deficits, known inventories – the free float – is back down near cyclical lows. The case for a ‘gradually then suddenly’ setup is developing and thus we marginally hike our already quite bullish forecast ($25/oz) to $25.50 and expect the Gold/Silver ratio to trade toward the lower end (~86) of its YTD range.”

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

Gold price sees another 5% rally this week as geopolitical uncertainty drives the market to touch $2350

he gold market continues its unstoppable run to record highs as it touches an all-time high of $2,350 an ounce ahead of the weekend.

Gold’s latest rally comes after the U.S. economy created 303,000 jobs in March, significantly beating expectations. At the same time, unemployment dropped to 3.8%. Despite the robust job growth, wages were relatively muted, rising 0.3%, in line with expectations.

Economists described the latest nonfarm payrolls data as a “blockbuster report,” which supports higher bond yields and relative strength of the U.S. dollar. Bond yields have risen as the market continues to shift their expectations regarding the start of the Federal Reserve’s easing cycle.

This past week, members of the Federal Open Market Committee have been fairly evasive on the topic of interest rate cuts. According to the CME FedWatch Tool, markets see a 54% chance of a rate cut in June. Last week, markets were pricing in a more than 60% chance of easing.

Analysts note this should be a hostile environment for gold; however, June gold futures last traded at $2,345.50 an ounce, up 1.60% on the day. The precious metal is up nearly 5% from last Friday.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that he suspects gold is attracting some safe-haven flows as geopolitical tensions in the Middle East heat up because of Israel’s war with Hamas in Gaza.

This week, Commander of Iran's Revolutionary Guard, Gen. Hossein Salami, vowed retaliation after an airstrike on an Iranian diplomatic compound in Syria killed seven members of the military group, including two generals.

In a social media post, Marin Katusa, founder of Katusa Research, gold’s safe-haven bid.

Time to Buy Gold and Silver

Tim Moseley

Experts even more bullish on gold than retail

Kitco NEWS has a diverse team of journalists reporting on the economy, stock markets, commodities, cryptocurrencies, mining and metals with accuracy and objectivity. Our goal is to help people make informed market decisions through in-depth reporting, daily market roundups, interviews with prominent industry figures, comprehensive coverage (often exclusive) of important industry events and analyses of market-affecting developments.

As has been the case for much of the new year, this week once again witnessed another steady climb in gold prices. Following last week’s spike to new all-time highs around $2,220 per ounce ahead of the Easter long weekend, the yellow metal shot to $2,265 just before the clock struck midnight on Sunday, and even a steady stream of hawkish Fed speakers couldn’t hold it back, as it set new successive highs as the week wore on.

Friday morning’s nonfarm payrolls report provided the exclamation mark to conclude a dramatic narrative for the precious metal, as even a blowout jobs report, which could serve to delay rate cuts even further than the Fed had threatened, was no match for gold’s upward momentum.

Buoyed by the escalation prospect of multiple global conflicts, spot gold saw its strongest move of the week, settling above $2,330 per ounce for the first time in history.

The latest Kitco News Weekly Gold Survey showed Wall Street sentiment outstripping even the unsinkable optimism of Main Street traders next week as fears of a pullback from the latest new highs were drowned out by still greater fears of geopolitical turmoil.

Adam Button, head of currency strategy at Forexlive.com, said whatever qualms traders may have about gold at these levels, resistance is futile. “Gold is stretched but the trend is impossible to fight right now,” he said. “Asia is buying almost every day.”

Darin Newsom, Senior Market Analyst at Barchart.com, said he’ll also be going with the flow. “It’s a tough call again this week, but for now I’ll stick with Newton’s First Law of Motion applied to markets: A trending market will stay in that trend until acted upon by an outside force, with that outside force usually investment money,” Newsom said. “For now, money seems to be flowing into gold, for whatever reason.”

“Could I make a technical argument the market could go lower next week? Yes, but gold is in a phase at this time where charts don’t mean anything,” he added. “It’s all fundamentals, and for now, central banks around the world continue to buy.”

Adrian Day, President of Adrian Day Asset Management, said the demand now extends beyond sovereign purchases and Asian investors, and he sees no signs of it slowing just yet.

“Notwithstanding Western investors generally not participating in the gold market – as evidenced by ETF outflows, low coins sales – there are clearly some big fish in the market buying and likely not only central banks,” he said. “Wealthy individuals and families, as well as savvy investors, are accumulating in response to awareness of the growing fragility in the global financial, economic, and geopolitical system.”

“As the financial markets stumble, more investors will turn to gold.”

SIA Wealth Management Chief Market Strategist Colin Cieszynski expects further volatility from gold prices, which is why he’s adopted a wait-and-see approach.

“I'm going to stay neutral,” Cieszynski said. “To me, gold still looks like it's had a big run and Treasury yields are still climbing, and that's going to push up the dollar. But on the other hand, gold also has these big tailwinds behind it, and that's why I went neutral for next week.”

He also pointed to next week’s U.S. consumer price report as something that could go either way. “Is it soon enough that we're going to start seeing the higher oil prices work their way in, or is that another month down the road? I'm, not sure,” he said. “There's a bunch of factors that say gold should go higher. There's a bunch of factors that say gold could go down a little bit. It's going to probably be a tug-of-war kind of week, is what I'm expecting.”

“My feeling of neutrality for gold is less about gold itself and it's more about everything going on around it,” he added. “So even though gold itself is looking good, I think gold could have some pretty big moves in both directions depending on what happens around it. I'm neutral not because I think it's going nowhere, but more because I'm not convinced on which way it's going to end up at the end of the week.”

“If you go bullish, you could look smart for half the week,” Cieszynski concluded. “If you go bearish, you could look smart for half the week.”

This week, 12 Wall Street analysts participated in the Kitco News Gold Survey, and their responses showed that bullish sentiment has fully captured the institutional imagination. Nine experts, or 75%, expected to see gold prices climb even higher next week, while only one analyst, representing a paltry 8%, predicted a price decline. The remaining two experts, or 17%, said headwinds and tailwinds were too close to call next week.

Meanwhile, 240 votes were cast in Kitco’s online poll, with 75% of Main Street investors anticipating further gains or sideways trading. 159 retail traders, representing 65%, looked for gold to rise next week. Another 41, or 17%, predicted it would be lower, while 40 respondents, or 17%, said they were neutral on gold’s near-term prospects.

Next week is a relatively thin one as far as economic data is concerned, though military and political conflict should provide plenty of grist for gold’s mill. Highlights include Wednesday’s U.S. CPI report for March, followed by PPI and weekly jobless claims on Thursday, and Friday’s preliminary University of Michigan Consumer Sentiment Survey.

Markets will also be watching the Bank of Canada’s and the European Central Bank’s monetary policy decisions on Wednesday and Thursday respectively, as there’s always a chance they may preempt the Fed with a rate cut.

Marc Chandler, Managing Director at Bannockburn Global Forex, doesn’t see the coming week’s consumer data slowing gold.

“Rising rates and US dollar have not dented gold’s surge,” Chandler said. “Next week’s US CPI should be firm but the demand for gold does not seem related to US inflation. Rather there appears to be a strong retail bid from Asia, notably Chinese investors and a few other countries with capital controls and/or shaky financial systems.”

Chandler said that trend followers and momentum traders also seem to be participating. “The price action reflects buying on pullbacks and breakouts, hallmarks of a bull market,” he added. “As the yellow metal is in uncharted waters, tough to talk about resistance. Maybe potential toward $2350. Support looks like $2225-50.”

Daniel Pavilonis, Senior Commodities Broker at RJO Futures, was parsing the gold rally even as it set new highs on Friday.

“I think some of the buying is the anticipation of rate cuts, even though we had a strong jobs report,” Pavilonis said. “I think the market is still expecting mild rate cuts going into elections or right around elections at a time when we're still seeing sticky inflation.”

He said the other driver of this move is what's going on with Israel and Iran, and the possibility of that conflict escalating further.

“Iran being backed, or being partnered up with, Russia, China, India. Russia has ships in the Black Sea, and oil prices spiking could cause further inflation at the same time when the Fed, if they don't cut rates, at the very least I think that they would just pause and let inflation run.”

Pavilonis said that the political realities of the United States during an election year are beginning to weigh heavily on markets.

“These guys, Democrat or Republican, want to keep their jobs,” he said. “I think that's part of it. It's the culmination of statistics, this being a strong year under these circumstances, the probability of rate cuts, or at the very least pausing if we do see escalation geopolitically, which would raise energy prices substantially… it's all bullish for gold.”

Zooming in on the near term, Pavilonis said he believes this week’s gold rally, and the moves on Thursday and Friday in particular, is largely on the back of geopolitics. “Iran basically said that they're going to come back and retaliate against Israel,” he said. “Is that going to be within Israel, or is that going to be just Israeli targets around Israel? But that is the expectation, and I think that would be bullish for gold.”

He also believes that Friday’s strong nonfarm payrolls report hasn't ruled out rate cuts either. “That's still on the table,” he said. “I don't think the Fed wants to linguistically condition the market for rate cuts, and then it doesn't happen.”

Pavilonis said that a big part of this calculation is the fact that there's no selling coming into the market despite this week’s steady stream of hawkish comments from multiple Fed speakers. “Now you're adding some geopolitical issues going on with the Middle East,” he said. “And with Ukraine, Blinken coming out and saying that Ukraine's going to join NATO, this thing has a possibility of escalating.”

“I think under these circumstances, that's very bullish for gold in the near term.”

Pavilonis added that if nothing kinetic happens over the weekend, he thinks commodities could see a pullback early in the week. “Energy prices would sell off if there's nothing, and then you might see gold take a little bit of a breather,” he said. “I think gold may come back to a nice round number like $2,000.”

And Kitco Senior Analyst Jim Wyckoff still sees potential gains for gold prices next week. “Steady-higher, as technicals remain bullish,” he said.

Spot gold last traded at $2,325.18 per ounce at the time of writing, up 1.48% on the day and 4.09% on the week.

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

Gold prices remain above $2,300 as investors bet on Fed rate cut

After hitting a new all-time record high of $2325.30 gold futures basis the most active June contract has experienced a slight price decline today. As of 5:05 PM EDT the June contract is currently fixed at $2308.50, down $6.50, or -0.28%.

Gold futures pricing was supported today as investors continued to bet on interest rate cuts by the Federal Reserve later this year. The precious metal's safe-haven appeal also received a boost amid growing geopolitical tensions.

Despite the modest pullback, expectations of the Fed lowering interest rates in the coming months remained elevated. In a speech at the Stanford Graduate School of Business, Fed Chair Jerome Powell confirmed the central bank's resolve to bring inflation back down to the 2% target, but emphasized that the overall economic landscape is still positive.

Powell highlighted the economy's robust growth, resilient labor market, and gradually moderating inflation, saying, "We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2%. Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy."

While the Fed chair and other officials stressed the need for more data before cutting rates, a move financial markets widely expect in June, investors remained convinced that rate reductions are on the horizon. Futures markets are currently pricing in around a 60% chance of a rate cut at the Fed's June meeting, with expectations for a total of 75 basis points of cuts by the end of the year.

The case for a more accommodative Fed policy stance was further bolstered by recent economic data, including an unexpected surge in U.S. jobless claims and slower services industry growth. Meanwhile, the European Central Bank's (ECB) latest meeting minutes showed officials saw a stronger case for beginning their rate-cutting cycle.

In addition to the rate-cut bets, gold prices found support from safe-haven demand amid heightened geopolitical risks. Strong central bank buying, particularly from emerging market economies, also contributed to the precious metal's appeal.

Looking ahead, all eyes will be on the U.S. jobs report for March, scheduled for release on Friday, April 5. Economists predict the economy added 200,000 jobs last month, with the unemployment rate dropping to 3.8% and hourly earnings rising 0.3%. A softer-than-expected report could further fuel expectations of an imminent Fed pivot

Wishing you as always good trading,

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley