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'A Bull Gold Market Has Just Begun' (back in November?)
In my November 19, 2022 post (link below), I discussed the many reasons why investors should not "mock the rock". At the time, I was witnessing several people on social media referring to gold as 'no more than a pet rock.' Since November, gold prices have risen substantially - briefly touching a record high after the Federal Reserve hiked interest rates but flagged a more stringent approach to raising rates further amid worsening economic conditions (Investing.com on May 3, 2023).
As the market expected that the Federal Reserve may pause interest rate hikes in the future, on May 4, COMEX gold prices hit the second highest of $2,085.4 per ounce, and the most active SHFE gold contract prices hit a record high of 459.98 yuan/gram.
International gold prices have risen alarmingly amid the US and European central banks raising interest rates, continued banking turmoil, the US debt ceiling crisis, rising concerns about economic recession in Europe and the United States, and falling stock indexes in Europe and the United States. COMEX gold and SHFE gold have risen 12% this year. The market expects that the international gold price will reach a high of $2,500 per ounce this year.
The rising global risk aversion has also stimulated a substantial increase in the demand for gold from central banks around the world. According to the World Gold Council, in the first quarter, the global gold demand dropped sharply by 13% year-on-year to 1,081 mt. Central banks in many countries are still keen to buy gold, increasing the global official gold reserves by 228 mt.
According to some analysts, based on historical experience, after the Fed raises interest rates, the upward trend of gold prices will continue until the economy shows initial signs of improvement after a period of interest rate cuts. From this point of view, the upward trend of gold will continue.
Some analysts also said that in the long run, anti-globalisation has led to a decline in trust in the U.S. dollar and U.S. debt, and gold, as the world's common currency, has gained more market trust. The price of gold is expected to rise further.
George Milling-Stanley, chief gold strategist at State Street Global Advisors, is firmly bullish on the outlook for gold prices, saying, "I don't think we've just seen a peak in gold prices. I think gold has a solid foundation to move higher.
Huaxi Securities said that gold prices still have a long-term basis for gains.
On May 4th, Saxo said they maintain an overall bullish outlook for investment metals, driven among others by the following developments and expectations:
Again, I would suggest not to 'mock the rock', as investors are being presented with ample evidence that it should be taken seriously.
“The cold hand of reality slapped a lot of people in the face that we’re not going to get to target inflation this year or next”
WSJ
Gold Prices Near Record as Investors Bet Inflation Is Here to Stay
Lower Treasury yields and a weaker dollar have also boosted the precious metal.
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