Gold Price Forecast – November 2024

Key Takeaways

• Gold hits yet another all-time high above $2758/toz in October
• US rates and dollar are up, but inflation and global instability provide offsets
• Gold currently appears to have better technical support than silver

Gold at Another High – More to Come?

Despite gold reaching yet another all-time high above $2758/toz (1) in October, Bank of America has issued a report in recent days suggesting that it could reach $3000/toz by 1H 2025. Citing its role as ‘the ultimate perceived safe haven asset’ the report also highlighted persistently large US budget deficits and ballooning public debt. Little relief is in sight, with the report noting that ‘Neither Kamala Harris nor Donald Trump seems to prioritize fiscal consolidation’. 

While the unsustainability of US public finances isn’t new – we highlighted this as a gold price driver in July’s Gold Price Forecast – it is worth underscoring that the balance of global economic policy is transitioning from extreme monetary (central bank) activism to extreme fiscal (budgetary) activism. The combination of higher – often non-productive – public expenditure, unfavourable demographics and higher real interest rates is likely to stress the global fiat currency system. This in turn, is likely to exacerbate trade and broader geopolitical tensions which are already apparent.

US Rates and Dollar Up – But There Are Offsets

The market euphoria which greeted the US Fed’s 0.5% ‘jumbo’ rate cut on 18 September quickly evaporated in October, driven by firmer US growth and higher inflation data. Having reached a two-year low at the end of September, US 2-Year Treasury yields – an indicator of near-term Fed policy – have risen by over 40bp so far in October (2). while CME FedWatch suggests that near-term rate cuts are now confined to 25bp in both November and December. In response, (3). the Dollar Index (DXY) has appreciated by c. 4%, additionally supported by dovish remarks from both the European Central Bank and the Bank of Japan. 

While such moves are bearish for non-yielding, dollar-denominated assets, such as gold, some mitigation is found when looking at long-term real (inflation-adjusted) rates, which are generally held to be a more important driver for gold valuation. Here, more than half of the rise in 10-year US Treasury nominal yields has been driven by a rise in expected (breakeven) inflation.

Higher inflation expectations are supportive of gold prices, offsetting much of the impact of higher (inflation-adjusted) rates. Combined with the broader economic dysfunction and geopolitical stresses described previously, the fundamental support for gold is stronger than it appears. Certainly, recent flow data on physical gold ETF/ETCs (4) and gold futures positioning (5) suggests gold remains well bid by investors.

Technical Analysis

Gold entered October in a consolidation pattern initiated after the 26 September high, subsequently forming a bull flag with confirmatory volume in the first half of the month. Breakout occurred on 15 October with the 11-26 September uptrend establishing a primary (100% extension) price target of $2813/toz. Gold has currently reverted to range-trading between the 38.2% and 61.5% Fibonacci extension levels of $2717/toz and $2754/toz respectively.

Both the RSI and the bearish engulfing candle on 23 October suggests some caution, though a sustained move above $2754/toz and ascending minor oblique resistance $2792/toz, clears the way to the $2813/toz target. Additional support is offered at $2694/toz (23.61% extension), $2680/toz (20-day Simple Moving Average) $2673/toz (major horizontal), $2667/toz (major ascending oblique) and $2657/toz (initial breakout).

Key Drivers Ahead

Notable events ahead for gold investors include Q3 Flash US GDP data 30 October, October US Employment data and October US ISM Manufacturing PMI on 1 November, October US ISM Services PMI 5 and US Presidential Election 5 November, US FOMC Rate Decision & Press Conference 7 November, October US Inflation Data and US Fed Presidents Musalem (centrist, non-voter) and Schmid (hawk, non-voter) speeches all on November 13, US Fed Chair Powell (centrist, voter) speech 14 November, October US Retail Sales 15 November, October US PCE Inflation data, US FOMC Minutes and November Flash Euro Zone Inflation data all on 27 November.

Citations

1. 1.https://www.lbma.org.uk/prices-and-data/precious-metal-prices#/table 

2.https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2024

3.https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html 

4.https://www.gold.org/goldhub/data/gold-etfs-holdings-and-flows

5.https://www.cftc.gov/dea/options/other_lof.htm

6.https://www.imf.org/en/Publications/WEO/Issues/2024/10/22/world-economic-outlook-october-2024

7.https://www.trackinsight.com/en/compare-etfs/PHAG,SSLV,OXA6,SLV,SIVR