Talking Gold — July 2024
Gold Market Recap
Gold finished a choppy month with a modest 0.42% decline, rebounding from slightly larger losses earlier in the month as softening economic data renewed rate cut hopes.1 Specifically, on the last trading day of the month, the Fed’s preferred inflation metric, the Personal Consumption Expenditures (PCE) Index, advanced at the slowest pace since March 2021.2
With softening economic data, implied fed funds forecasts signal the first rate cut may now be in November. The increased probability of at least one rate cut this year has helped gold maintain technical support above US$2,300/oz. And despite the slight loss in June, the yellow metal continues to exude positive cross-over momentum. The gold spot price once again closed above its crucial 100-day and 200-day moving averages, and the 50-day ended the month well above the 100- and 200-day moving averages.3
For the quarter, the price of gold rose 5.26%. Gold is now up double digits (+12%) through the first half of the year, its best first half since 2020 when pandemic-related volatility sent prices higher.4 Excluding that anomalous period, this is gold’s best first half since 2016. 2024’s double-digit gains add to the counterintuitive 35% surge in the spot price since the first rate hike this cycle on March 15, 2021.5
This resilience in price action supports our view that gold has been able to weather macro headwinds from rates and the US dollar. Secular influences also underpin the rally, including fiscal imbalances, sustained demand from central banks, and overseas investor demand (e.g., China) for perceived safe-haven assets.
Gold Performance Drivers
Flows: In June, global gold ETF holdings increased by 0.29%, an estimated 7 metric tons(t).6 This was the first positive month of inflows since June 2023, according to Bloomberg data.4 Net speculative positioning in COMEX gold futures increased to 158,202 contracts in June, which is significantly higher than the 3-year average of 70,022 contracts.7 The recent extension of long contracts highlights that money managers remain bullish on gold.
Factors: Gold has been range bound since crossing US$2,300/oz for the first time in April. The yellow metal’s 14-day RSI is near 50, indicating that gold is in neither overbought nor oversold territory.8
Fundamentals: According to the World Gold Council 2024 Central Bank Gold Reserves (CBGR) Survey, which was conducted between February 19, 2024 to April 30, 2024 with a total of 70 responses, 29% of central banks respondents intend to increase their gold reserves in the next 12 months, the highest level observed since the survey began in 2018.9