Gold Price Forecast – August 2024

Key Takeaways

• Gold hits another all-time high above $2,483/toz in July as flows remain supportive.
• Markets price in further easing of US rates for the remainder of 2024, softening the USD.
• Gold now appears to be trading in a slightly widening ascending channel.

Gold Hits New High Amid Solid Sentiment and Political Risk

Gold hit yet another all-time high above $2,483/toz during July, with the attempted assassination of former President Trump appearing to give the precious metal a significant, if temporary, boost. At the time of writing much of these gains have been retraced, although this still leaves gold 0.4% higher month-on-month.

We discuss the most recent macroeconomic support for gold in detail below, but clearly, the precious metal continues to enjoy flow support from several sources. While the People’s Bank of China (PBoC) appears to have made no net purchases for two months in succession (May & June) the Reserve Bank of India (RBI) recorded its largest monthly purchase of gold in almost two years in June. Overall, the pace of central bank purchases seems to have moderated, though as highlighted in last month’s Gold Price Forecast, the longer-term prognosis remains favourable. 

Turning to private sector demand indicators, we note that, despite elevated gold prices (1), physical gold ETF aggregate flows have remained positive in recent weeks, with both the US and Europe being notable sources of demand strength. Elsewhere, the most recent Commitments of Traders (CoT) report from the CFTC suggests that speculative gold futures positions are now at a 15-month high (2), while the newly announced reduction in Indian gold and silver import tariffs (from 15% to 6%) is also likely boost gold (and silver) demand going forward (3). 

US Rate Outlook Also Lending Greater Support

Having rejected the Fed’s hawkish rhetoric in June, rate markets pushed back further in July, with an increasingly dovish outlook being priced in for the remainer of 2024. Two-year US Treasury yields are now trading some 30bps lower month-on-month while 10-year yields have moved 10bps lower.

A quarter-point rate is now all but priced in at the Fed’s next rate decision on 31 July, while Fed Fund Futures imply over a 90% probability of two or more quarter-point cuts by the end of 2024 (4). In response, the US Dollar Index (DXY) has traded mildly lower. All of this is supportive of ‘zero-yielding’ USD-denominated assets such as precious metals (5). 

These dovish developments have been underpinned by both incoming US economic data and subsequent statements from the Federal Reserve. Inflation data, both at a headline and core rate, suggests a continued resumption of a downward trend, while growth indicators such as employment, services and manufacturing activity and jobless claims all point to a slowing US economy. Notably, Chairman Powell’s most recent testimony to Congress acknowledged that maintaining a restrictive monetary policy now entailed greater two-way risks to the Fed’s dual mandate on growth and inflation. 

Technical Analysis

Gold now appears to be trading in a slightly widening ascending channel with the upper bound formed by the 12 April, 20 May and 17 July tops and the lower bound by the 3 May, 7 June, 26 June bottoms, having failed to sustain a breakout at the recent high. This channel currently ranges between $2,489/toz (resistance) and $2,300/toz (support). More immediate support is offered by the rising 50-day Simple Moving Average at $2,361/toz.

We note that gold is also currently trading above, but close to, the sharply rising 20-day Simple Moving Average at $2,386/toz. However, we would view this notional support as being rather weak, given the widespread 50-day Simple Moving Average and neutral momentum indicators.

Key Drivers Ahead

Upcoming events for gold investors include July Eurozone Flash Inflation on 31 July, FOMC US rate decision and press conference on 31 July, July US Non-Farm Payroll data on 2 August, July US ISM Services PMI on 5 August, July US CPI Inflation data on 14 August, July US Retail Sales on 15 August, US FOMC Minutes on 21 August, Jackson Hole Symposium 22-24 August, August Eurozone Flash Inflation and July US PCE Inflation on 30 August. 

Citations

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

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

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

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

5. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html