Gold Bulls Eye More Record Highs Despite Lightning Gains
The comments below are an edited and abridged synopsis of an article by Polina Devitt, Reuters
Nicky Shiels, head of metals strategy at Swiss gold refinery MKS PAMP, recently revised the gold price forecast for 2024, sparking inquiries from market participants about the potential for gold to experience a surge like that seen in cocoa prices. Cocoa prices have more than doubled since the beginning of 2024 due to poor harvests in Ivory Coast and Ghana. In contrast, spot gold, a highly global and liquid market, reached record highs on five previous trading sessions as investors sought exposure to the metal as a means of wealth preservation.
Gold hit a record high of $2,305.04 an ounce last week, marking a 12% increase since the start of the year. Shiels dismissed the possibility of gold replicating cocoa’s rapid gains, citing significant stocks held by individuals and central bank reserves, which collectively own one-fifth of all mined gold. She emphasized the inability to de-stock gold bars at the same rate as cocoa bars.
Despite the unlikelihood of gold experiencing cocoa-like gains, analysts maintain a bullish outlook, despite technical indicators suggesting the market is overbought. Marex analyst Edward Meir highlighted the absence of clear resistance levels on the charts, making it challenging to predict where values might peak.
Gold’s rally in April, following a 9.3% jump in March, occurred despite traditional macroeconomic challenges such as a strong dollar and elevated US real interest rates. Over-the-counter and futures gold markets experienced increased trading volumes, with a notable surge in activity in the gold options market compared to equities and bonds, indicating specific interest in gold.
Looking ahead, many analysts anticipate gold testing new highs once the US Federal Reserve begins cutting key rates, stimulating demand from investors on the sidelines, including holders of physically backed gold exchange-traded funds (ETFs). Analysts at Bank of America (BofA) previously proposed a $2,400 per ounce price estimate if rate cuts occurred in the first quarter of 2024, reaffirming this estimate for the year regardless of the timing of rate cuts.
