Let’s take a moment to reflect on how this year has unfolded for gold. As a key reserve asset for many and a metal that responds dynamically to various themes and catalysts, gold always offers intriguing opportunities for both short and long-term strategies.
It’s always wise to observe how gold behaves in the face of different events and news catalysts; doing so helps identify patterns and correlations that can deepen our understanding of this precious metal. Comparing such insights with our trading journals can enhance our ability to pinpoint significant market drivers and better forecast future movements.
Let’s dive into a quick recap of the first half of the year, which, after initially slow beginnings, saw gold rally broadly upward from January to June.
Gold’s performance between January and February was a bit of a balancing act, fluctuating between $2,000 and $2,070. This tug-of-war was largely influenced by traders navigating shifts in Federal Reserve interest rate expectations, stemming from U.S. dollar and bond yield strengths, alongside evolving geopolitical developments.
As January kicked off, U.S. economic indicators frequently exceeded expectations. For instance, January’s CPI came in at 3.4% versus the anticipated 3.2%, and December’s employment report surpassed forecasts with robust job growth and wage increases. These factors bolstered the U.S dollar and bond yields, which surpassed the 4.00% mark in January.
Conversely, escalating tensions in the Middle East, like the Houthi attacks in the Red Sea, alongside concerns about China’s economy, likely supported gold prices, preventing them from dipping below $2,000. Mid-January, when the U.S. and U.K. coordinated airstrikes on Houthi targets in Yemen, investors turned to gold as a safe-haven asset, despite rising bond yields.
In February, the strength of the U.S. dollar seemed to momentarily overshadow gold, until reports of lower-than-expected U.S. CPI and negative retail sales data curbed the dollar’s momentum mid-month.
From February 29th to April 19th, gold experienced a remarkable rally, climbing approximately 17% to hit $2,400. This surge was likely fueled by heightened geopolitical tensions, emerging recession signals from global data, and an evident wave of FOMO among traders.
Early March marked the beginning of gold’s ascent, coinciding with unsettling economic news. The U.S. unemployment rate in February rose from 3.7% to 3.9%, and hourly earnings growth dropped from 0.5% to 0.1%. The ECB cut its 2024 growth outlook, while global PMI data indicated contractions.
April saw the rally intensify as geopolitical tensions soared. For example, as Israel prepared for possible missile threats from Iran, gold soared to new highs near $2,375. Gold enthusiasts seemed to have their prized asset moment, reminiscent of Gollum from Lord of the Rings! Despite stronger-than-expected U.S. inflation data, which normally pressures gold prices, the yellow metal remained resilient leading into April, hinting that safe-haven demand might have overshadowed traditional interest rate concerns at that juncture.
By mid-April, gold had reached around $2,400, a roughly 17% increase since late February, marking new all-time highs. This sustained hike seemed to create a feedback loop where price gains attracted additional buyers, though the momentum showed signs of vulnerability to profit-taking as geopolitical tensions eased or in response to strong U.S. economic data.
Between April 19th and June 28th, gold appeared to settle into a consolidation phase, hovering between $2,300 and $2,400. Its movement during this period was likely influenced by geopolitical events, fluctuations in Fed rate cut expectations, and the U.S. dollar’s strength.
The Israel-Iran conflict in April likely initially supported gold as a safe-haven asset. Iran’s missile and drone attacks on Israel over the weekend of April 13-14 caused volatility, and gold prices spiked to new heights around $2,430.
The Federal Reserve’s evolving stance on rate cuts seemed to cap gold prices, bolstering U.S. dollar and bond yields each time gold tried to break higher. For example, strong U.S. data and hawkish comments from Fed officials, including at a particularly Fed-centric meeting in May, quelled rate cut expectations.
In June, China’s announcement of a pause in new gold purchases by the People’s Bank of China also appeared to influence gold prices, leading to a sharp drop, although the move was limited as traders may have awaited clearer signals on Fed policy.
This first half of 2024 highlighted gold’s transition from a relatively quiet phase near $2,000 to shattering several all-time records above $2,400.
Gold revealed its dual role as both a safe harbor during geopolitical tensions, notably the Israel-Iran face-off, and amid fears of economic recession, while also serving as an indicator of monetary policy expectations.
Throughout January to February and May to June, gold seemed to trade counter to U.S. dollar and bond yield sentiment, but from March to April, it defied the odds with its upward trajectory despite robust U.S. economic data and a hawkish Federal Reserve posing challenges.
There’s a lot to absorb from this review, but we’ll explore these insights further in our next gold market recap later this week. We’ll conclude with reflections and projections for 2025. Stay tuned!
