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Gold futures racked up another record high settlement Monday, with momentum driven primarily by central bank purchases, while performance for mining company shares continued to lag gains in the metal.
Also, Friday’s stronger than expected jobs report has prompted investors to re-evaluate the likelihood for the Federal Reserve to cut interest rates this year, and J.P. Morgan Chase CEO Jamie Dimon warned that rates could surge to 8% or more in the coming years.
Analysts at UBS raised their year-end gold price forecast by $250 to $2,500/oz, saying they expect gold ETF holdings will increase once the Federal Reserve starts cutting rates around mid-year.
Front-month Comex gold (XAUUSD:CUR) for April delivery closed +0.2% to $2,331.70/oz, its 11th gain in the past 13 sessions and a new record close after touching a new all-time intraday high of $2,372.50/oz during the session, and silver (XAGUSD:CUR) gained for the eighth straight session, with the front-month April contract ending +1.1% to $27.712/oz, its best settlement value since June 16, 2021.
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The People’s Bank of China said Monday it added to its bullion holdings by 0.2% to 72.74M troy oz last month, the central bank’s 17th straight monthly increase of gold purchased for its reserves.
China’s official foreign exchange reserve assets in March came in at the highest since November 2015, climbing to $3.246T, the highest since December 2021.
Central banks from other emerging market nations, particularly India, also have been adding to their reserves this year, with the World Gold Council reporting that bank stocks of gold have grown for nine consecutive months.
Data suggests systematic commodity trading advisors – or momentum-based algorithmic funds – also have been ramping up purchases, with overall futures trading jumping, according to broker SP Angel.
The Commitment of Traders weekly report said gold long positions reached 178K contracts for the week ended April 2, their highest number since July 2020.
“Gold tends to become more attractive in times of instability, when investors pile into safe-haven assets as a hedge against the economic climate, geopolitical tensions or inflation, [which is] likely to continue for the rest of this year,” ING Economics said, although if interest rate cuts do not materialize in the coming months, then gold prices may pull back.