Gold Futures Regain Momentum as Economic Concerns Intensify

Gold futures found renewed strength on Monday, closing back above the crucial 50-day moving average, as economic data fueled expectations of potential interest rate cuts by the Federal Reserve later this year.

Friday’s close took gold futures to its lowest price point since hitting the record high of $2477.10, and a record close of $2461.40 on Monday, May 20. What followed was a dramatic and strong three-day price decline reaching a low of $2351 on Thursday, May 23. Between Wednesday, May 22, and Thursday the 23rd, gold declined just over $88 per troy ounce and consolidated trading sideways until gold traded to its low last Friday.

This recovery was driven by a weaker U.S. dollar, which declined 0.53% to 104.09, its lowest level since April 9.

The first signs of a potential resurgence in gold prices was largely attributed to mounting concerns over the state of the U.S. economy. The Institute for Supply Management (ISM) reported that U.S. manufacturing activity slowed for the second consecutive month in May, with new goods orders dropping at the fastest pace in nearly two years.

This data point, coupled with a moderation in inflation as indicated by the Personal Consumption Expenditures (PCE) price index report released on Friday, has bolstered the notion that the Federal Reserve may implement one or two rate cuts this year to support the economy.

Historically, gold has been viewed as a safe-haven asset during periods of economic uncertainty and low interest rates, as it tends to perform well in such environments. The recent data releases have reignited optimism among investors that the Fed's aggressive rate hikes aimed at curbing inflation may have achieved their desired effect, paving the way for a potential shift in monetary policy later in the year.

According to Reuters, "U.S. manufacturing activity slowed for a second straight month in May as new goods orders dropped by the most in nearly two years, but a measure of input inflation fell back from the highest since mid-2022, a monthly survey showed on Monday."

The recent downturn in gold prices, which saw the precious metal dip below its 50-day moving average for the first time since late February, has been attributed to fluctuating expectations surrounding the Federal Reserve's rate decisions. However, the latest economic data has reignited bullish sentiment in the gold market, as investors anticipate a potential easing of monetary policy in the coming months.

As the Federal Reserve continues to navigate the delicate balance between supporting economic growth and managing inflationary pressures, the performance of gold will likely remain closely tied to the central bank's policy decisions and the broader economic landscape.

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley

100 oz. of gold per Bitcoin? Peter Brandt says it’s inevitable

Financial news headlines saw an explosion of comparisons between Bitcoin (BTC) and gold following the launch of the first spot BTC exchange-traded funds (ETFs) in the U.S. and the parallel rallies of both assets to new all-time highs that followed.

But over the past couple of months, chatter about the topic has quieted down as Bitcoin entered consolidation while gold surged to another record high. According to Bloomberg Intelligence senior commodity strategist Mike McGlone, on a relative basis, the surge in BTC price didn’t exceed the peaks it reached versus gold and the S&P 500 in 2021.

“The January US #ETF launches set records for inflows, enhancing Bitcoin's status as a leading indicator, and the hangover may have implications for risk assets,” McGlone tweeted. “It was a near-perfect storm for the benchmark crypto to make new highs in 1Q, but #Bitcoin didn't exceed peaks vs. #gold and the S&P 500 from 2021.”

“Highly volatile and speculative, the 24/7-traded crypto was rising vs. gold the last time the S&P 500 e-mini future crossed above its 50-week moving average in November, but this time the Bitcoin/gold cross is falling,” he added.

Despite this, most analysts agree that the launch of the first spot BTC ETFs has been a monumental success, with all the ETFs combined surpassing $50 billion in assets under management in record time, taking just 57 days to do what it took gold ETFs 5 years to accomplish.

Looking at the ETFs individually, the performance of BlackRock’s iShares Bitcoin Trust (IBIT) stands out as it became the fastest ETF in history to reach $20 billion in assets under management.

After surpassing the Grayscale Bitcoin Trust (GBTC) ETF in AUM earlier this week, IBIT is now targeting the iShares Gold ETF (IAU), which currently holds roughly $29 billion in AUM.

According to Nate Geraci, president of the ETF Store, IBIT could achieve that feat before the end of 2024.

While many analysts have argued that there is room in investor portfolios for both gold and Bitcoin as both offer protection against excessive money printing and currency debasement, data provided by Kaiko shows that the correlation between gold and BTC remains below the 2022 highs, suggesting investors still hold a differing view of the two assets, and Bitcoin may deliver more upside.

“Bitcoin’s 60-day correlation with safe-haven gold has been increasing in April, nearing a yearly high as of last week,” Kaiko said. “However, it remains significantly below its 2022 highs of nearly 50%.”

“Gold has rallied in recent months due to strong central bank demand, even as global gold ETFs have experienced outflows,” they added. “Gold ETF holdings dropped to 3,079 tons in April, the lowest level since February 2020.”

“In contrast, Bitcoin has been primarily driven by ETF demand,” Kaiko said. “Despite Bitcoin’s market cap of $1.3tn remaining low compared to gold’s $16tn, there is significant room for growth. This low correlation and potential for growth boost Bitcoin’s appeal as a portfolio diversifier.”
And according to legendary trader Peter Brandt, while it currently requires around 29 ounces of gold to purchase one Bitcoin, that number could increase to 100 over the next two years depending on how things develop in the markets.

By Jordan Finneseth

Time to Buy Gold and Silver

Tim Moseley

Market experts and retail traders align once again with a majority predicting gold price recovery

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.

While gold prices did manage to move higher during the first half of the shortened Memorial Day week, the days were mostly characterized by a march toward Friday’s PCE report, with precious metals investors looking to the Fed’s preferred inflation metric to gauge the likely path of interest rates, and the prospects for further gains for gold.

After opening the week trading at $2,334 per ounce, spot gold managed to hit a high just a couple of dollars short of $2,360 during Monday's Memorial Day holiday, but it failed to hold above $2,350 during the evening session. The return of American markets the following morning brought renewed enthusiasm for the precious metal, driving it to the weekly high of $2,361.45 by noon Tuesday. But once again, the bulls ran out of momentum and overnight trading saw the price fall precipitously, which began gold's steady decline to a new weekly low of $2,325.06 early Thursday morning.

The precious metal bounced hard off this level, however, and by the start of Thursday's North American session, gold was once again within a dollar of $2,350 per ounce. Thereafter began the wait for Friday morning’s PCE report, which brought renewed drama to precious metals markets, driving gold from $2,344 per ounce a half hour before the 8:30 am release to its daily high of $2,359.72 15 minutes afterward.

But as had been the case on Monday and Tuesday, the bulls once again ran themselves to exhaustion, and gold prices fell all the way to a fresh weekly low of $2,320.59 per ounce shortly after 3:00 pm EDT.

The latest Kitco News Weekly Gold Survey has industry experts and retail traders aligned on gold’s near-term prospects, with a majority seeing gains while equal minorities hold a neutral or negative position.

“I’m sticking with up for this week as sellers had an open door to force a breakdown and they haven’t been able to,” said James Stanley, senior market strategist at Forex.com. “The weekly bar in spot Gold is showing as a doji and there remains a lot of support structure underneath current price, and that’s what sellers were unable to drive through this week. And gold futures finished with a bearish engulf in the prior week and that similarly failed to show follow-through.”

“We could be nearing a turn,” Stanley added, “but until that support structure is violated, I’m going to bias with what’s been the dominant trend.”

“Up,” said Adrian Day, President of Adrian Day Asset Management. “Gold still has further to go in its recovery from the mid-month drop, and somewhat cooler inflation numbers in the U.S. will help support the case for the Federal Reserve to cut rates.”

Ole Hansen, head of commodity strategy at Saxo Bank, said he’s adopting a neutral stance for next week. “Rangebound for now, with risk slightly skewed to the upside,” he said.

“Down,” said Darin Newsom, Senior Market Analyst at Barchart.com. “While the more active August futures contract has technically completed its 3-wave short-term downtrend, it is not showing a bullish reversal pattern through early Friday morning. This leaves the door open to continued pressure early next week. However, technical analysis has to come with an asterisk given the increased chance of chaos tied to China and Russia this coming weekend. As a safe-haven market, this could spark new buying in gold markets ahead of Friday’s close.”

Sean Lusk, co-director of commercial hedging at Walsh Trading, was unpacking the different factors that led to the gold price decline on Friday.

“’m bullish still… I’m a little surprised,” he said about the pullback. “We're at month-end here, so how much of this is just some unwinding? You had a lot of longs in the June contract, so I understand that, prior to option expiration and first notice, you've had a retreat in price. That wasn't a surprise, it was expected.”

“I think interest rates for near term here may have topped, and I think if you have that, you're going to pressure the dollar, and maybe [gold prices] start to work back higher,” Lusk said. “However, Chinese manufacturing came out weak, which hit copper. Some of the industrial metals have given back here, but silver's still holding $30 on the break.”

“I just feel that these breaks are eventually going to be buying opportunities across the board,” he added, looking at the commodities complex as a whole. “You just can't get any traction in crude oil. And there's some real worry about the equities. They've come off here quite a bit, particularly the Dow Jones hitting over 40,000, we just broke 2000 points. NASDAQ has just gotten whacked here. So I don't know… if this starts to leg lower in the equities, does it pull everything else with it? That's the issue.”

“All this talk of raising rates, let's just throw that out,” Lusk said. “I think we go back to more of the buy-the-dips mentality here in commodities overall. Bond yields are going to start to come off here a little bit, I think the tops are in. I just think that with housing, pending home sales, nothing's moving, and I don't see that getting any better until rates come down a little bit. They're going to bring the talk back to rate cuts rather than rate hikes, which is really what turned the stock market around recently.”

“We're going to get another whole slew of data here,” Lusk added. “I think we're going to have a shift change in sentiment coming soon, given the fact that maybe yields have topped, and futures are going to get a lift, and that's going to put pressure on the dollar where rallies are sold in the dollar.”

This week, 10 Wall Street analysts participated in the Kitco News Gold Survey, and a solid majority have returned to the bullish camp with six experts, representing 60%, expecting to see gold prices climb higher next week. Two analysts, or 20%, predicted a price decline, and the same number see gold trending sideways as it waits for direction during the coming week.

Meanwhile, 222 votes were cast in Kitco’s online poll, with Main Street investors mirroring expert sentiment this week. 128 retail traders, or 58%, look for gold prices to rise next week. Another 53, or 24%, expect they will be lower, while 41 respondents, representing the remaining 18%, expect prices to remain rangebound during the week ahead.

Next week promises a return to a more normal rhythm of economic news releases. On Monday, markets will receive the S&P global manufacturing PMI and the ISM manufacturing PMI for May. Then on Wednesday, the Bank of Canada will announce its interest rate decision, with economists predicting a quarter-point cut, and shortly afterward, markets will receive the ISM services PMI for May.

Thursday morning brings the ECB interest rate decision, with markets priced in for a 25 basis point cut to the benchmark interest rate, along with weekly jobless claims. And Friday morning, markets will await the release of May's nonfarm payrolls report.

“The week ahead features possible rate cuts by the ECB and the Bank of Canada, and US jobs data,” said Marc Chandler, Managing Director at Bannockburn Global Forex. “Spot gold consolidated between roughly $2322 and $2364 last week. Still, it has advanced in five of the last six sessions. The momentum indicators look poised to turn higher.”

“I like it higher,” Chandler said. “A move above $2372 could signal a retest on $2400.”

Everett Millman, Chief Market Analyst at Gainesville Coins, was looking past this week’s near-term volatility to the medium-term drivers that are likely to dominate gold’s price action between now and the fall.

“I definitely agree that the end-of-month volatility we're seeing is typical,” he said. “That's more of a trading dynamic than anything else, so I don't think it speaks very strongly to what's driving the gold market overall.”

“It is true that the summer season is usually quite bad for gold,” Millman said. “Those are the dog days of summer where typically we expect to see gold prices, at minimum trade sideways, if not drift lower. But that's under normal circumstances. I think that much of what gold has done this year bucks the normal trend on every front. The Fed has been consistently hawkish and rate cut expectations seem to be fluctuating. They definitely have been volatile in their own right. So I think it's difficult to point toward a direct line between Fed expectations and what gold is doing.”

Millman said his general take is that gold is responding to the uncertainty surrounding the rate path itself, rather than any sense of what that path might be.

“If we go from 70 percent expectation of a September rate cut to 30 percent, back and forth, it speaks to the fact that the market still doesn't have a strong hold on what it expects the Fed to do,” he said. “I think that will be the big story over the summer. How do the Fed rate cut expectations change between now and when we get closer to September? I don't think anybody really knows. You could make a pretty compelling argument that even the FOMC members don't seem to know exactly where things are going to go.”

Millman said that in the absence of anything else changing, the gold market will continue to try to read the collective mind of the Fed. “Obviously, all of the macro geopolitical factors are still there, but I think gold has mostly baked in all of that stuff, he said. “That's why we're still sitting above $2,300 now.”

“Fed policy, and how the economy holds up, I think, is going to be the big driver over the summer for gold.”

“Bull,” said Mark Leibovit, publisher of the VR Metals/Resource Letter. “Hanging in there.”

“We are likely in higher timeframe bearish correction against the move up from 19001,” said Michael Moor, Founder of Moor Analytics. “The trade below 24343 (+1.3 tics per/hour) has brought in $113.5 of pressure. These roll into the (Q) and are ON HOLD. In (Q) we are currently holding exhaustion warned about at 23447 with a 23433 low and have rallied $30.4. The trade above 23594 (-6 per/hour) now warns of decent strength. Decent trade back below where this comes in at 23452 (-6 tics per/hour starting at 9:20 am EST) will warn of decent pressure and take bear calls OFF HOLD.”

And Kitco Senior Analyst Jim Wyckoff sees gold prices staging a recovery next week. “Steady-higher as charts still bullish,” he said.

Spot gold last traded at $2,327.20 per ounce at the time of writing, down 0.69% on the day and down 0.29% on the week.

Kitco Media

Ernest Hoffman

Time to Buy Gold and Silver

Tim Moseley

Gold Price Forecast – June 2024

Key Takeaways

Gold Hits Another High in Bumpy Markets

Gold Rises on Growing Geopolitical Tension

US Rate Headwinds Persist, but Euro to the Rescue

Technical Analysis

Key Drivers in June

Mike Ingram

Gold News

Market Analysis
 

Key Takeaways

Gold appears to be one of the few assets that reflects rising geopolitical risk, reaching another all-time high.

The European Central Bank is now set to lead interest rates and the US dollar lower.

Gold’s technical position is currently critically poised as it negotiates a potential bear flag.

Gold Hits Another High in Bumpy Markets

Gold was essentially flat in volatile trading in May, reaching yet another all-time high above $2,400/toz in the latter half of the month before profit-taking set in, triggered by a more hawkish US rate outlook.

Gold Rises on Growing Geopolitical Tension

Rising geopolitical risk continues to be a major support for gold. May saw a further round of trade sanctions between the US and China, ostensibly aimed at curtailing import dumping and protecting domestic manufacturing. China also retaliated to US measures targeting China’s support of the Russian war in Ukraine, with sanctions targeting US support of both Ukraine and Taiwan. In Taiwan itself, China launched surprise military exercises aimed at harassing the inauguration of Taiwan’s new pro-independence president.

Meanwhile, in Europe, Russia has made advances in a surprise Spring offensive against Ukraine and the conflict in the Middle East has continued to escalate. Both have exposed deep divisions within the international community and are set to play a part in the forthcoming elections in Europe, the UK, and the US. There are no clear markers for an abatement of these risks – in fact, quite the opposite.
 

Despite this proliferation of geopolitical tension, there is little sign that this is uniformly priced into asset markets. Crude oil prices softened over the month, while it appears investor flows still favour risky assets (equities, cyclicals, and high-yield debt) in the face of global instability and despite institutional investors citing geopolitics as a ‘tail risk’. It remains to be seen how this apparent inconsistency will be resolved.
 

US Rate Headwinds Persist, but Euro to the Rescue

The prospect of the US starting to cut interest rates took a further backstep in recent weeks, with inflation and growth data within the most recent US Purchasing Managers Index (PMI) causing investors particular concern. Supported by continued hawkish Fed minutes and rhetoric, markets have further pared their expectations of a rate cut by September’s meeting to c. 45%, according to CME FedWatch.

Despite this, we note that US bond markets have ended the month much as they started and it is arguable that with so little now priced in, the scope for a further bearish rate impact on gold is now limited. Moreover, it now seems likely that it is the European Central Bank (ECB), rather than the Fed, that will lead the global interest rate cycle downwards, with a rate cut seen as coming as early as the ECB’s 6 June meeting.

Markets have reacted by marking up the Euro some 2% against the US Dollar over the last month, which is somewhat supportive of gold.

Technical Analysis

Momentum indicators suggested that gold entered May mildly oversold, and these quickly recovered in the first half of the month. However, gold reached overbought territory on 20 May while registering another all-time high at $2,445/toz. This was confirmed by a subsequent steep decline, bottoming out on 24 May near $2,325/toz, breaking both the 100-day and 200-day Simple Moving Averages.

Gold is currently struggling to negotiate a bear flag, in a range of $2,341/toz – $2,359/toz. A break below the previous low of $2,325/toz, might imply further downside towards $2,300/toz and $2,270/toz based on Fibonacci retracements of the break from the high. Proximate resistance is seen at the current 50-day 100-day Simple Moving Averages at $2,360/toz and $2,381/toz respectively.
 

Key Drivers in June

Key data points that will impact gold’s technical position going forward include the US Manufacturing PMI on 3 June, ECB rate decision on 6 June, US Non-Farm Payrolls on 7 June, the Fed rate decision – and more importantly the corresponding updates to economic forecasts and ‘dot plot’ – together with a raft of US inflation data, all on 12 June.

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley

Gold Tumbles as Stronger Dollar, Rising Yields Cast Doubt on 2023 Rate Cuts

Gold prices fell sharply on Thursday, as U.S. dollar gains and climbing Treasury yields sparked concerns over the Federal Reserve's anticipated path of interest rate cuts this year.

The precious metal's decline came ahead of a critical inflation report due on Friday, with investors bracing for potential surprises that could force the Fed to recalibrate its monetary policy outlook.

At the center of attention is the Personal Consumption Expenditures (PCE) price index for April, set to be released by the Bureau of Economic Analysis (BEA). The core PCE is the Fed's preferred inflation gauge, capturing changes in consumer spending across a wide range of goods and services.

Treasury yields surged on Thursday, reflecting muted demand at this week's $183 billion bond auctions, as investors grew wary of persistent inflationary pressures amid improving economic growth prospects.

Minneapolis Fed President Neel Kashkari's comments, which did not rule out another rate hike, had a strong impact on market sentiment. Yields climb, with the 10-year note yield reaching a one-month high of 5.471% and the 2-year note yielding 4.958%.

According to the CME's FedWatch tool, markets are pricing in a near-certainty that the Fed will maintain its current benchmark interest rate of 5.25%-5.5% at the June meeting. However, the probability shifts substantially in favor of rate cuts later in the year, with a 12.3% chance of a cut in July and a 47% chance in September.

As of 6:50 PM ET, the gold futures contract for August 2024 is currently fixed at $2,359, down $15.20 or 0.64%, and an additional decline of $4.70 (0.20 %) in Australia. The U.S. dollar index gained 0.51% to 105.164, a major factor in gold’s price decline today.

All eyes are now on Friday's PCE report, which will likely shape the Fed's future policy decisions. Market participants are also eagerly awaiting the central bank's updated economic projections and "dot plot" forecasts for interest rates, due after the June 12 FOMC meeting. The current "dot plot" envisions three rate cuts this year, a scenario that could be revised based on incoming data.

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley

Gold futures shine bright with a strong gain, forming a "3 river morning star"

Gold futures shine bright with a strong gain, forming a "3 river morning star" teaser image

Gold futures rebounded strongly after last week's price pullback. As of 4:55 PM ET, gold futures for the June 2024 contract surged $27.10, settling at $2,361.80.

With the June contract nearing its first notice day, the August 2024 gold futures contract will soon become the most actively traded. Currently, the August 2024 contract is up $27.40, trading at $2,384.30. Multiple factors have been driving gold's ascent to record highs. While some analysts attribute the precious metal's rally to dollar weakness and declining U.S. Treasury yields, our analysis suggests that geopolitical and macroeconomic influences have played a more significant role.

Ongoing military conflicts in the Middle East and the Russia-Ukraine war continue to fuel geopolitical uncertainty, bolstering gold's safe-haven appeal.

Additionally, central banks worldwide have been steadily increasing their gold holdings over the past two years, with China's central bank among the most aggressive buyers.

China's consumer demand has also been a major catalyst for gold's recent surge. According to UBS, "A significant driver of the surge in gold prices has been the robust increase in China's gold demand, particularly evident in the first quarter of 2024.

Chinese consumers have demonstrated an unprecedented appetite for gold jewelry, with purchases reaching record levels. This surge in demand from China has significantly contributed to the upward trajectory of gold prices and is expected to continue supporting prices in the near term."

Gold investors and traders have remained active buyers on price dips, supporting the precious metal's pricing at these new highs.

On the daily chart, a simple Japanese candlestick pattern called a "Three River Morning Star" has emerged. This pattern, formed after a price decline, can be a strong indication of a key reversal from bearish to bullish.

The pattern consists of a large red candlestick within a defined downtrend, followed by a small-bodied candle (either red or green) that opens and closes below the first red candle. The final candle is a large green candle that opens above the middle candle and closes above the center of the body of the first candle.

With gold's recent strength and the formation of this bullish reversal pattern, the precious metal's upward momentum could continue to shine in the coming sessions.
 

Kitco Media

Gary Wagner

Time to Buy Gold and Silver

Tim Moseley