Another month in the books and another record close for the gold price, despite a strong October rebound in the U.S. dollar and Treasury yields. After reaching another all-time high at $2800 on Wednesday, some technically healthy profit taking during month-end book-squaring on Thursday took Gold Futures $50 lower for a 3.4% gain in October.
After Gold Futures printed an August monthly close well above $2500, silver prices have also been trending higher and are back-testing a recent breakout at formerly stiff resistance at $32.50, which is now support.
Silver tends to underperform bullion in the initial phase of a precious metals bull market, then outperform gold during the more developed stage. In the previous bull market silver saw gains of 1,000% over the previous lows when it established the current all-time high of $50 per ounce in April of 2011.
Silver tested 12-year resistance at $35 two weeks ago and is up over 40% this year, with the next resistance level being at $38. The recent shakeout of short and medium-term bullish positions in the $32–$35 range could pave the way for long-term buyers to step in decisively. This shift may set the stage for silver to target a new all-time high, potentially surpassing the $50 level by Q1 2025.
In the meantime, global gold demand swelled about 5% in the third quarter, setting a record for the period and lifting consumption above $100 billion for the first time, according to the World Gold Council (WGC) on Wednesday.
This was a record for the third quarter of any year, while demand from gold investments more than doubled on a year-on-year basis to 364 tons, the WGC stated in its Gold Demand Trends report. Total gold demand during the September quarter stood at 1,313 tons.
Although central banks remained net buyers of gold in the third quarter, activity slowed compared to last year and the start of this year. Purchases by global central banks were at 694 tons since the beginning of 2024. This is below the 2023 record, but in line with the levels seen in 2022.
With investment demand picking up the recent central bank slack, gold still has room to move higher as institutional investors are only just beginning to re-enter gold-backed exchange-traded funds (ETFs). Buying in bullion-backed ETFs flipped to gains in Q3 after prolonged outflows.
The WGC said that the rise in gold price has broadened investors’ interest in the safe-haven metal amid increasing media attention on the “stellar” year-to-date returns.
Gold has been one of the best-performing commodities this year, surging by over 33%. With the safe-haven metal having outperformed the S&P 500, we have been seeing increased recommendations to hold bullion from the normally “who cares about gold” crowd on Wall Street.
Gold and silver have rallied with more room to run, Citi's head of commodities research said last Friday. "I am bullish on gold and silver over the next couple of months," Layton told CNBC in an Oct 25 interview, explaining that the best bull markets for gold and silver in the last 20 years have happened when developed markets are weak or weakening and when China is easing and potentially set to strengthen. "This is the best setup for gold and silver, certainly for a decade," he added.
Mainstream media attention to gold continued this week as BlackRock's EMEA investment strategy head, Karim Chedid, said investors are looking at gold as a "diversification hedge" in the current market environment.
"When I consider that gold is a non-yielding asset and that rates, yields are indeed coming down, even if they're not coming down as quickly as in previous rate cutting cycles, that also reduces the opportunity cost of holding gold, which is a positive," Chedid told Bloomberg Television on Monday morning.
Although growing generalist investor interest has been rising with gold to new all-time highs in all major currencies, Google searches for “gold price” are still below the peaks seen over the past five years. This indicates that investor interest remains subdued, suggesting there may be potential for further upside despite technically extreme overbought gold being susceptible to a 5-10% profit-taking correction at any time.
After scaling new all-time-record highs for a fifth consecutive quarter in a row, Gold Futures have seen dips bought quickly in Q4. An earlier gold sell-off after reaching $2700 in late September pushed prices down by $80 before renewed buying within two weeks triggered the run to $2,800. The gold price remains overbought technically long-term (basis Stochastics and RSI), and is due for a healthy correction at any time.
On the downside, initial support is at $2700, with strong support on its 50-day moving average, now at $2642, and providing solid support since mid-July. Gold under $2600 would be troublesome, while gold under $2500 could suggest the rally is over.
Yet, there is nary a substantial headwind in sight. December Gold is extending a period of successive record highs, moving the psychological milestone of $3000 per ounce into view, while next week is shaping up to be one for the record books as well.
As we head into the most contentious U.S. presidential election in our 250-year history next Tuesday, the polarization is considered by many to be the highest since the onset of the Civil War over a century and half ago.
American voters are approaching the presidential election with deep unease about what could follow, including the potential for political violence, attempts to overturn the election results and its broader implications for democracy, according to a new poll by The Associated Press-NORC Center for Public Affairs Research.
After arguably the most divisive presidential election in U.S. history taking place on November 5, a highly anticipated Federal Open Market Committee (FOMC) Policy meeting decision will be announced on November 7.
Despite the Fed’s preferred measure of underlying inflation posting its biggest monthly gain since April on Thursday, the market is still pricing a 100% chance of a quarter-point cut at next week’s Fed meeting, bringing rates to a range of 4.5%-4.75%. The core Personal Consumption Expenditures price index (PCE), which excludes volatile food and energy prices, rose 2.7% in September versus a year earlier.
There is increasing uncertainty, however, over whether the central bank’s target will go below 3.75%, as economists warn of inflationary pressure from both presidential candidates’ spending plans.
With a current budget shortfall of $1.8 trillion, the U.S. government deficit and national debt are on an unsustainable path that neither candidate has an answer for. Eventually, an untenable sovereign debt crisis, along with the extremely divisive politics, could negatively impact not only the U.S. but also the rest of the world as 64% of global debt is denominated in U.S. dollars.
In looking at the economic policies of both candidates, the odds are that the U.S. budget deficit will climb even higher no matter the victor. Over the course of Donald Trump’s previous term, the former president added $8.6 trillion during his four years, while Biden/Harris have added $8.1 trillion.
A third major catalyst for the gold price next week will be China’s expected announcement to issue over 10 trillion yuan ($1.4 trillion) in extra debt in the next few years to revive its fragile economy. Fiscal and monetary stimulus programs are bullish for gold as they add to national debt, debase the currency, and drive inflation higher.
China's top legislative body, the Standing Committee of the National People's Congress (NPC), is looking to approve the fresh fiscal package, including 6 trillion yuan which would partly be raised via special sovereign bonds, on the last day of a meeting to be held from Nov. 4-8, according to Reuters.
Along with these three key catalysts expected to bring more volatility into the precious metals market next week, both gold and silver are already being supported by safe-haven buying. Major conflicts in Ukraine vs Russia, the growing threat of Russia vs NATO, Israel vs Palestine, Israel & the U.S. vs Iran, North Korea vs South Korea, and China recently threatening Taiwan, has kept gold well bid.
Meanwhile, global gold miner ETF GDX is in the process of back-testing the recent breakout from multi-year resistance at $40, triggered by the sector’s largest gold miner Newmont Corp (NEM) selling off 16% last week.
Although investors were spooked by the largest gold miner's Q3 all-in sustaining costs (AISC) rising to $1611/oz, Q4 guidance from Newmont was actually pretty good with AISC margin improving 40% quarter over quarter at a $2750 gold price.
Nevertheless, with Newmont being a 12.56% holding of GDX and a bellwether for the sector, the 16% selloff in NEM pulled the entire mining sector down with it.
If the gold price hits its $3000 technical cup & handle breakout target by Q1 2025, as expected, GDX could see $50 and GDXJ may run to $60 after building a strong 4-week floor at former multi-year resistance levels of $40 and $49, respectively.
With these formerly strong resistance levels now key support, we are seeing GDXJ showing relative strength to major miner ETF GDX. With generalist investors still distracted by overvalued MAG7 stocks and bitcoin, the higher-risk junior ETF is still 65% below its all-time high at $127, while GDX is 30% below its peak at $60 when the gold price was nearly $1000 lower in 2011.
Furthermore, the capital market window has opened wider recently, with juniors Rio2 Limited (RIO.V), Montage Gold (MAU.V), and Asante Gold (ASE.CA) announcing large financing packages, along with two major miners inking strategic deals.
Kinross Gold (KGC) expanded its exploration footprint within Canada by investing in New Brunswick-focused junior Puma Exploration (PUMA.V) and its various properties situated near the province’s Bathurst mining camp.
Also, Agnico Eagle (AEM) has taken up a 13% stake in copper-gold explorer ATEX Resources (ATX.V) with an investment totaling C$55M ($40M), which the latter will use to advance its flagship Valeriano project in Chile’s Atacama region.
Over the past few years, the Junior Miner Junky (JMJ) real-money portfolio has been accumulating shares in several late-stage gold and silver developer take-over candidates with 3x-10x upside potential from severely depressed levels. Some have already risen sharply with the mining sector, while others with optionality leverage have begun to breakout from strong accumulative bases.
If you require assistance in accumulating the best in breed precious metals related juniors, and would like to receive my research, newsletter, portfolio, watch list, and trade alerts, please click here for instant access.
Full disclosure: I have purchased stock in the open market of companies mentioned in this article and cover Rio2 Limited and Montage Gold in the JMJ newsletter.
