Gold prices up 12% in first six months of 2024 (2024)

ADELLA HARDING Elko Daily Correspondent

Gold has performed remarkably well so far in 2024, rising by 12% over 2023 and outpacing most major asset classes, according to the World Gold Council’s Mid-Year Outlook 2024, which says the current prices may reflect gold prices for the rest of the year.

The report released Tuesday states gold has benefited from continued central bank buying, Asian investment flows, resilient consumer demand and a “steady drumbeat of geopolitical uncertainty.”

“Our analysis suggests the gold price today broadly reflects consensus expectations for the second half of the year. However, things rarely go according to plan. And the global economy, as well as gold, seem to be waiting for a catalyst,” the reports states.

The outlook then states the catalyst could come from falling interest rates and continued investor support of gold.

The New York spot price for gold on Tuesday closed at $2,330.30, but prices were higher earlier this year. The London fix price reached $2,394.80 per ounce on April 12. The World Gold Council report shows the June 28 LBMA (London Bullion Market Association) gold price was $2,331 per ounce, and the average in the first half of the year was $2,203 per ounce.

Gold has made headlines this year, breaking record highs several times between mid-March and mid-May, and the report states gold has been trading above $2,300 an ounce for most of the second quarter, and gold has provided double-digit returns across multiple currencies.

“All this despite high interest rates globally, barring a few exceptions, and a strong U.S. dollar — a combination that is often seen as a hostile environment for gold. The relationship between gold, real interest rates and the U.S. dollar is not “broken” as some market participants may think,” the report states.

“In fact, this relationship has likely prevented gold from rising further. It is simply that, in the current environment, these factors have been offset by others that are more dominant,” the outlook states.

The World Gold Council report also says that the global economy and financial markets are in a transitional period. Bond yields have moved generally sideways as Western central banks have kept policy rates on hold. But pressure is mounting on policymakers as they balance lower but stubborn inflation and signs of cooling labor markets.

Inflation

This is exemplified by the sooner-than expected rate cut by the European Central Bank, while the Bank of England and U.S. Federal Reserve have so far stayed put.

Jim Wycoff of Kitco reported Federal Reserve Chairman Jerome Powell said in a Tuesday speech at a European Central Bank conference he is pleased with how U.S. inflation has resumed a downward trend following a rebound at the beginning of this year.

Wycoff wrote Powell’s comment might signal that the Fed will lower may decide to lower interest rates in the coming months, but Powell didn’t endorse such a decision.

Meanwhile, India remains one of the economic bright spots, and China will likely continue to find alternative measures to invigorate growth, according to the report.

“This, in turn, implies that gold may continue to move in a similar range to what we have seen in recent months. In other words, after gaining good momentum in the first half of the year, current market trends indicate a rangebound performance from its current levels in the second half of the year,” the outlook states.

Additionally, the outlook states that for gold, “Western investors have been a missing part of the puzzle. While investors have been active — as denoted by high market volumes — retail investment demand has been low and gold ETFs have seen net outflows [year to date]. Gold’s strong performance, despite the absence of strong Western flows, suggests that, unlike previous periods when gold broke record highs, the market is still not saturated and could see another leg up.”

The report also looks at political risk. While the current unease could be seen simply as the new normal, geopolitical risk has been on the rise in recent years and is unlikely to abate anytime soon, according to the outlook.

Political polarization, armed conflicts and erosion of globalization in favor of nationalism and select alliances fuel economic instability. Geopolitical risk is particularly difficult to predict and may come from where it’s least expected, the World Gold Council writes.

“What is true, however, is that gold reacts to geopolitics, adding 2.5% for every 100-points the Geopolitical Risk Index moves up. And while part of this effect can be transient, it could also be a trigger for deteriorating financial conditions, which may have a more lasting effect,” the outlook states.

“In summary, gold may remain rangebound if current market expectations prevail. However, there’s a clear path for gold to outperform from here, likely fueled by Western flows. Conversely, in the event that central bank demand drops drastically, rates remain high for longer and Asian investor sentiment flips, we could see a pullback in the second half,” the outlook concludes.

Share prices

The outlook only covers gold, not share prices in companies that produce gold, but share prices aren’t reflecting the high gold prices in the first half of this year.

Newmont Corp. shares closed on Tuesday at $41.70, up 5 cents; and Barrick Gold Corp. shares closed at $ 16.61, up 5 cents. Barrick and Newmont are joint venture partners in Nevada Gold Mines. Kinross Gold Corp. shares were at $8.02, down 22 cents; while Coeur Mining shares were at $5.62, up 23 cents. SSR Mining Inc. shares were down 2 cents to $4.46.

Ryan McIntyre, a managing partner at Sprott, said shares in gold producers have not rallied as strongly as gold prices. He expects a two-to-one ratio for gold mining stocks.

“So, if gold were up 13%, we’d expect the miners to be about 26% or so — plus or minus — and that’s really due to operating leverage that all miners have,” McIntyre said in a Kitco interview on June 28.

“We really haven’t seen that yet, which is actually good. If you’re looking to invest today, gold mining stocks are actually a great spot to be. They haven’t kept up to even the gold price this year,” he said.

Ernest Hoffman wrote for Kitco on July 2 that precious metals analysts at Heraeus said the prospect of a Donald Trump presidential victory in November could push investors around the world to invest in gold.

Also, CBS News reported that Anthony Rousseau, head of brokerage solutions at TradeStation Group, said it is unlikely that gold has peaked in 2024.

“We’ve seen a pause in net global positive liquidity since April, which is reflected in assets like gold and Bitcoin where upward movement has stalled,” he said.