In a remarkable display of resilience, gold continues to defy the typically negative impacts of a strong dollar and rising yields, as highlighted by experts in the field. The precious metal has maintained its position as a ‘buy-on-dip’ market, challenging the expectations set by economic trends.
The yellow metal’s performance was particularly notable in March, as it rallied strongly and briefly hit a new record high of $2,221 per ounce. This surge occurred after the Federal Open Market Committee (FOMC) maintained their stance on three rate cuts for the year. However, gold experienced a mild dip in profits as the dollar gained strength. Ole Hansen, head of commodity strategy at Saxo Bank, noted that gold is on track for a 7 percent gain this month. Meanwhile, silver also showed impressive growth with a nearly 10 percent rally, recovering from earlier setbacks.
On Tuesday, spot gold rose by 0.33 percent to $2,178.57 an ounce, and U.S. gold futures saw a 0.36 percent increase to $2,182.70 an ounce. This performance contradicts the usual pattern where gold is negatively impacted by a stronger dollar and higher yields. Instead, the metal has found robust support from various factors, including geopolitical risks, central bank purchases, and retail buying in key markets like India and China.
In early March, gold’s breakthrough above $2,088 per ounce triggered a strong buying response, particularly from technical and momentum-driven hedge funds. In the fortnight leading to March 12, managed money accounts purchased an astonishing 9.2 million ounces, or 285 tonnes of gold. This volume highlights the aggressive nature of the buying, considering it surpassed the amount sold by ETF investors over seven months. Central banks have also played a significant role, having bought over 1,000 tons in the past two years.
Hansen explained that traders in this group often react swiftly to changes in market fundamentals or technical developments. He further stated that for gold to maintain its momentum, it needs to hold key support levels to prevent profit-taking induced price drops. However, recent corrections have been minor, supporting the market’s buy-on-dip mentality.
Despite hitting a new high last week, gold experienced a slight consolidation but did not significantly challenge support levels at $2,146 and $2,132. This resilience, coupled with the rally towards $2,200, underscores the market’s strong buying sentiment. Hansen maintains a positive outlook, predicting that gold could reach $2,300 and silver $28 by 2024, with technical indicators suggesting potential highs of $2,500 for gold.
Silver, in comparison, has had a more challenging journey due to its lack of support from central banks and its reliance on industrial demand. However, the metal received a boost recently from a recovering industrial sector, particularly copper, which hit an 11-month high. The gold-silver ratio also experienced fluctuations, showcasing the dynamic interplay between these two precious metals.
As the economic landscape continues to evolve, gold and silver remain pivotal players, reflecting not just market trends but also broader geopolitical and economic undercurrents. The resilience of these metals, particularly gold, in challenging economic times speaks volumes about their enduring appeal and strategic importance in the global financial ecosystem.
