The gold price hit record levels in the first three months of 2024. Opening the period on January 2 at US$2,041.20 per ounce, the yellow metal was coming off previous highs set in December 2023.
Gold remained rangebound for the first two months of the year, staying above the US$2,000 level until it briefly broke through support in the middle of February, falling to its quarterly low of US$1,991.98 on February 13.
Following this low, gold began a slow climb toward the start of March, ultimately soaring to a quarterly high of US$2,251.37 on March 31. Gold has continued to move since then, briefly passing US$2,400 on April 12.
The first eight weeks of the year saw key gold market trends extend from 2023.
Joe Cavatoni, North American market strategist at the WGC, told the Investing News Network (INN) in an email that western gold ETFs marked three years of outflows in Q1, but this was offset by modest gains from Asian funds.
“One area of note in the ETF landscape is the Asian region. The Asian-domiciled ETFs, while smaller than the US and European markets, are positive in terms of net flows year-to-date (were positive in 2023 as well). This amplifies the importance of looking into the detail as it relates to gold investment to get a complete picture,” he said.
Other notable central bank buyers during the first two months of the year included Turkey, which added 16 MT of gold, Kazakhstan which purchased 12 MT, and India, which increased its reserves by 13 MT.
“With ETFs still seeing outflows, I think there’s a new buyer in the market, one that’s also interested in physical gold, not paper substitutes. This could be sovereign funds joining central banks, other institutions or other deep-pocketed players who don’t really care that much about the price, deciding that the time has come to hedge with gold,” he said.
By the middle of March, gold had set record highs and was pushing against resistance at the US$2,200 mark.
More broadly, Cavatoni sees conditions setting up for broader global interest in gold.
“As central banks continue to be significant buyers and geopolitical risks and global uncertainties drive investors towards the perceived safety of gold, the current environment underscores gold’s importance as a strategic asset for portfolio diversification and risk mitigation. Therefore, while there may have been a perception of western disinterest in gold, recent developments indicate a sustained and broad-based demand for the precious metal,” Cavatoni said.
Gold stocks started to gain some momentum in March, but have been slow to take off.
Tiggre attributed this lag to a misreading by investors who had expected the gold price to retreat from all-time highs.
“It’s my view that the ‘smart money’ in the west thought gold had spiked and its next big move would be down, so gold stocks were ‘leading’ gold lower. However, it’s increasingly clear that that call was wrong, and I expect to see the stocks outperform this year when those who got it wrong realize their mistake,” he said.
“I’ve never seen this much of a disconnect before while the gold price is breaking out,” he said. “I’ve seen … this much of a severe deficit twice before, when the gold price was threatening to break down to a much lower level.”
The last two times this happened, there were huge moves for juniors within six months of the start of the reversion.
While the second quarter of the year is just beginning, the yellow metal has already made some major gains. Gold continues to make moves and has even traded above US$2,400 for the first time ever.
While gold is traditionally viewed as a safe haven during times of geopolitical tension, Tiggre said the ongoing nature of these conflicts has caused an evolution of sorts for investors. “Unless one of these conflicts spreads, I don’t think either will have much impact on gold. They are part of the new normal background level of political radiation,” he said.
For Tiggre, a key point to watch is continued buying of gold from outside of the sphere of influence, where he thinks there is a push to move away from the US dollar. He also expects a recession, which he believes will move gold higher.
For his part, Cavatoni believes continued uncertainty around geopolitical events and the macroeconomic landscape may be a tipping point for western investors. “Will those Fed rate cuts be enough to move investors back into the gold? We believe this will serve as a catalyst to bring back the western investor, even at these high prices,” he said.
If gold continues to rise in Q2, it could prove a critical time for the yellow metal and gold stocks. Producers are likely to move first, followed by companies with advanced-stage projects and lastly juniors. However, it’s important for investors to remember with rate cuts uncertain, the momentum in the market now could just as easily shift into decline.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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