- Gold is wrapping up one of the most challenging summers in memory and, despite the odds, gold has surged to new highs in recent months.
- Gold was overbought in the summer of 2024, its fundamental drivers were not performing well or really favorable, and the AI stock bubble continued to distract investors.
- However, gold defied all of that to rally broadly through June, July, and August, a bullish sign.
- Gold’s gains touched a new all-time high of $2,532 per ounce before settling around $2,505 per ounce at the start of this important week’s trading.
Overall, gold has been a truly challenging summer, bravely resisting the opposing forces. The summer markets continue in June, July, and August. As of mid-week, gold is up an impressive 7.7% so far this summer with just two days of trading remaining. On a year-over-year basis, gold has surged an astonishing 30% in recent months! This proved to be the fifth best summer performance for gold in the modern era in the past quarter century.
According to today’s gold analysts’ forecast, Gold typically drifts sideways to the downside in early summer before beginning its fall rally in July and then accelerating in August. On average, during the 20 years that gold prices have been bullish in the market since 2001, gold has risen 2.6% throughout the entire summer market. But during the summer of 2024, the average price of gold this season has tripled.
Top Forex Brokers
According to gold trading platforms, gold typically swings in a summer trading range of +/-5% from the final close in May. This has been the case for most of the summer of 2024, until the gold rally erupted in recent weeks. In mid-July, gold jumped to a single-day record high before retreating significantly. This massive 1.8% rally was a challenge, as that morning saw a hawkish surprise from the Federal Reserve on U.S. retail sales.
But gold failed to hold that mid-summer breakout, falling 4.2% over the next week or so. A few weeks later in early August, gold gained a strong 1.6% on higher levels than weekly US jobless claims. Then, two days later, it rose another 1.7% to its second nominal record of the summer of 2024 on geopolitical news. Israeli intelligence warned that it believed Iran was preparing a major strike against Israel.
Overall, the primary driver of gold in the near term is speculators trading gold futures. This has a major impact on gold prices because of the extreme leverage inherent in it. Each contract controls 100 ounces of gold, which is worth $250,000 at $2,500. However, these traders are only required to maintain a cash margin of $10,500 in their accounts for each contract traded. This allows for a maximum leverage of 23.8x today, and often higher!
This means that every dollar invested in gold futures can have a price impact of up to 24 times greater on gold than a dollar invested directly! At maximum leverage, a move of just 4.2% against speculators’ bets wipes out 100% of their risk capital. This forces these guys to be extremely short-sighted, measuring their trading time horizon in days or weeks. They therefore watch the fortunes of the US dollar as their primary trading signal, which they trade based on the Fed’s probabilities.
Coming out of May, futures expectations for a US rate cut by the Fed in 2024 were running at just 36 basis points. They had steadily risen this summer on the back of weaker-than-expected key US economic data, then rose to 140 basis points at the height of the fear during the Japanese stock market crash in early August! Last week, they were still running at 104 basis points, anticipating four full 25 basis point rate cuts.
Gold Price Forecast and Analysis Today:
Gold’s challenge in the face of bearish gold futures in recent months is even more impressive when you consider where gold has entered this summer. Gold tends to trade in a relative range to its primary 200-day moving average. According to Gold Price Forecast for the coming days, the distance gold travels above its 200-day moving average reveals an overbought state, when gold has likely risen too quickly to continue. Overbought states were reached in both April and May.
Buying gold at every low level remains the best trading strategy until global geopolitical tensions calm down and the US dollar recovers.
The first Friday of each month typically begins with the most important economic data to move the markets, including gold, and the monthly US jobs report. In early June, there was a massive four-standard deviation outperformance with the Biden administration announcing the creation of 272,000 jobs in May compared to expectations of +190,000. This led to the expected 2024 Fed rate cut of 37 basis points, and gold then fell 3.6% to $2,286!
Moreover, this was its worst daily loss in 3.6 years, confirming its summer lows. However, gold’s total decline since its last record close in mid-May was only 5.7%. This was a very mild product of record overbought conditions. Given this setup, including the positioning of gold futures, gold could have easily been close to a 10% correction in mid-summer. It didn’t, and it quickly rebounded in a show of defiance.
Ready to trade our Gold price forecast? We’ve made a list of the best Gold trading platforms worth trading with.