Even as the dollar strengthened and traders retreated to pricing in a 25 basis point move for the Fed in the last week or so, that did not faze gold prices at all. There was a slight decline towards $2,605 earlier this week, but that did not last as prices rebounded in the past couple of days. Now, gold is up another 0.3% today to $2,638 and is holding gains of nearly 28% year to date.
After rising earlier in the year, gold saw some consolidation in mid-April to June. All before rising again, and so far this year, there has been no comeback for gold. It has been an amazing journey to reach new highs on multiple occasions in 2024.
The case for buying gold can be put in very simple terms. Adam made a good post about that here. And all of this still rings true.
But even as a gold pessimist, what has surprised me most throughout the year has been its resilience and how indifferent gold has behaved in light of the many changes in global economic developments.
The most pressing case this year was that we would see lower interest rates. Although expectations of interest rate cuts by the Federal Reserve declined, this did not prevent gold from rising. Central bank buying is certainly a key part of the narrative. But it is difficult to find a meaningful decline on gold charts.
The pace and scale of the rally is actually the highlight in my view, with the ETF situation also not matching that.
Gold ($/oz) versus SPDR Gold ETF holdings
Despite all the recent novels, I’m still a big fan of gold. But as I mentioned before, it’s hard to advocate for something this unilateral in the last 10 months or so.
I’ve said it before and I’ll say it again. I would really like to see a healthy pullback in gold in the coming weeks before we enter the seasonal buying months of December and January.
Otherwise, it becomes somewhat risky even if the reasons for staying so long are still very much in place.
I mean, it’s said that if China temporarily stops buying gold, it would be a good reason to remove some of its purchases from the top. But again, I think it’s China. How reliable the reports are, we cannot be completely sure.
But still, even with last week’s Fed rate changes and dollar interest rates rising, it has barely scratched gold’s armor. That’s totally something. Safe haven offers amid events in the Middle East may cancel all this out but beyond that, we don’t see such moves fizzling out as has been the case throughout the year.
So far, the best reason I can call for a gold pullback is technical. We may be too late in pressing some form of trigger point. However, it has happened a few times in the past few months, but here we are.
What are your thoughts on gold as the year winds down before we reach the seasonal peak in December and January? Is a delayed gold maturity considered a pullback/correction? If so, what catalyst are you looking for?