Gold Price Outlook – August 2024

“Gold Price Outlook
Gold prices continued to display strength during July, setting several new record highs during the month. That strength continued into early August, with prices reaching their most recent record high on 2 August. Prices touched an intraday high of $2,522.50 (basis the December Comex contract) and $2,498.90 (basis the October Comex contract) on that day.

Prices touched those levels in response to a U.S. labor report that missed investor expectations and played a pivotal role in large losses in markets around the world. While the report showed signs of weakness in the labor market, this weakness needs to be put into perspective.

The unemployment rate has been ticking higher since the March 2024 report. Unemployment rose from 3.8% in March to 4.3% in July. The July reading was the highest that it has been at since October 2021, when it stood at 4.6%. So, while this is a 33-month high in the U.S. unemployment rate, it still is at historically low levels as can be seen in the long-term chart that displays the U.S. unemployment rate back to the 1950s. Additionally, as can be seen in the total non-farm employment chart, more U.S. residents have jobs today than ever before. Job openings too, while down from the highs that were seen during the post covid recovery period, are still high when compared to the period between the Great Recession and covid pandemic. All of this data suggests softening in the labor market but does not suggest a calamity; the 114,000 jobs added last month are in line with normal economic conditions. These figures collectively suggest that the reaction to the jobs report were overdone.

While the report had a lot to do with weakness in markets around the world, escalation of tensions in the Middle East and an interest rate hike by the Bank of Japan also played a role in the market turmoil.

Economic and political tensions are expected to remain elevated over the next several months, which should help to keep gold prices supported. The August U.S. jobs report, which will be released in September, will be watched closely by markets for any signs of continued weakness in the U.S. labor market. There is a lot of speculation regarding how the Fed would react to another weak labor report, ranging from expectations that the Fed would lower rates by 50 basis points in September to the possibility that they lower rates at every one of their last three meetings for this year if labor conditions continue to deteriorate. Gold prices also will be supported by the upcoming U.S. election, which promises to be contentious and could possibly increase market volatility, which should increase gold demand as a portfolio hedge.

A lot of the risks that are expected in the next few months are largely priced into the gold market at present, which has risen from strength to strength so far this year. Gold prices are expected to remain at elevated levels, with healthy support for prices around the $2,390 level. Prices could break below this level, and make a run to $2,300, but that support, which had been tested a few times this year, is unlikely to break unless there is a dramatic improvement in various political and economic risks, something that is not expected. On the upside, while prices are very likely to break their recent record high during the next six months, a strong move above these levels should not be expected in the near term.”