Gold Price Outlook – July 2024

Gold Price Outlook
“Gold prices have been moving mostly sideways with a slight downside bias, since the fourth week of May. Gold prices have strong support at the $2,300 level, with prices rebounding from around this level on several occasions over the course of June but not breaking below it.

Economic indicators are mixed, which is resulting in the flip flopping in investor sentiments and thus gold prices that has been observed over the past month. On balance though it seems that the indicators are supportive of gold prices in the recent range or higher. While economic conditions are not outright weak, it is clear that there has been a loss in economic momentum that over the past few years. This was to be expected given the more restrictive monetary policy and the pull back in fiscal support post covid.

Monetary policy is expected to remain restrictive until the Fed gains more confidence that inflation is on a sustainable downward trajectory or when economic conditions show more consistent signs of deterioration. While the Fed is not interested in engineering a recession it is presently more focused on containing inflation, which can be harder to constrain, than reviving a flagging economy if it should spiral downward.

The longer monetary policy remains restrictive the greater the probability that something in the economy or financial system breaks, which is supportive of gold. In addition to monetary policy, and what CPM Group thinks to be a more important factor, political risk both in the United States but also in other countries has the potential to break something in the global economy or financial system. As mentioned in the front section of this report, the move globally toward more protectionist governments is a risk to both inflation as well as economic growth.

With these risks running in the political realm, gold prices are unlikely to see any meaningful weakness in the foreseeable future. There will be periods from time to time when gold prices soften in reaction to some good economic news, but there seems little in the form of news both political or economic that is likely to cause gold prices to weaken sharply any time soon.

On the downside, gold prices, as mentioned above, have strong support around the $2,304 level both over the next couple of months and longer term. If gold prices are able to break and settle below this level, it could cause gold prices to weaken toward $2,285. There is a small probability that gold prices soften toward $2,165. Such weakness is likely to be driven by seasonal or technical factors rather than fundamentals. There seems a very limited risk that economic or political risks decline sufficiently over the next few months to warrant such a decline. Given the seasonal or technical reasons behind such possible weaknesses, the decline is likely to be short -lived and if it does occur should be used as a buying opportunity.”