Gold Prints Monthly Topping Tails As Messy Month of June Begins
Gold Rejected The $2400 Level For The 2nd Consecutive Month
While the precious metals conspiracy theorists are sure to begin blaming the “CRIMEX” (Comex) and the bullion banks for suppressing the gold price. The reality is that gold rallied ~50% in the last two years, from $1620 in November 2022 to $2450 in May 2024. That is up there with one of the best rallies over a span of ~18 months in the history of the gold market:
Gold (Weekly - June 2022 to May 2024)
However, if we pull up the monthly chart we can see the ‘topping tails’ on the April/May candlesticks:
Gold (Monthly - 10 Year)
A similar set of monthly topping tails appeared in August/September 2011 when gold peaked at $1923.70 and proceeded to enter a cyclical bear market.
Does this mean the top is in for Gold?
The answer is that we don’t know, but it is likely that gold will continue to experience an extended consolidation. This consolidation could extend throughout June and into July as market participants await further clarity on the direction of economic growth and interest rates. Currently, the market is pricing the prospect of a September interest rate cut from the Federal Reserve as a 50/50 coin flip. It is also apparent from recent Fed speakers that nobody at the Fed has a high level of confidence in any economic forecast.
The situation is fluid.
June is typically a messy month for gold, with the yellow metal declining more often than not in June. Sentiment has already cooled off substantially in the last two weeks (DSI = 62 as of Friday’s close), and a further sentiment reset would serve to rebuild the wall of worry that a gold bull market always needs to climb.
I am sticking with the gold bull and foresee continued global central bank accumulation on gold price weakness. The central bank buying is not only coming from the PBoC (China), but also from India (Reserve Bank of India gold purchases in Q1 2024 surpassed the entire total of purchases from the RBI in 2023), and countries like Poland and Turkey.
The $2300 level represents the first important support level below current levels, followed by a larger zone of support between $2225-$2250. Resistance at $2380, $2430, and then the ~$2450 all-time high level.
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25% annual return is probably a bit high historically, but making up for lost time, perhaps. The physical gold I bought in 2004 (@ $US400) is now worth $2,300 in 2024. My friend Gemini says this (about that): "The average annualized gain in gold over the past 20 years (2004-2024) is around 9.9%. This translates to a total return of roughly 561.9% for the entire period." My 2004 gold investment has done exactly what I wnated for the past 20 years - I consider gold to be an "inflation-bond" (sort of) with a 10% annual rate of return. And this is what I tell people when they ask "Why would you ever want to own gold?"