Gold Surge Falters Ahead of Jackson Hole

Gold prices had been increasing rapidly ahead of the Jackson Hole Symposium (JHS) as US data suggested maintaining an accessible safe haven is a wise option but reversed on Thursday.

Peak Performance

Gold prices reached a record high earlier in the week, but since the commencement of the Federal Reserve's annual retreat in Jackson Hole, Wyoming, the yellow metal has drifted lower.

It seems markets are accepting that they have become somewhat excessive in predicting multiple rate cuts from the Fed. Previously, markets were anticipating interest rate cuts of at least four times by the end of the year but are now cutting back on these expectations. This led to a rise in the yield on two-year bonds and subsequent gold decline. However, the trend remains unchanged for now.

The continued upward trend has been fuelled by a combination of a weaker US dollar in anticipation of a unanimously expected interest rate decrease by the Fed at their mid-September meeting and general concern for the health of the US economy. Investors have been purchasing gold exchange-traded funds (ETFs), which could indicate they are seeking to hedge against downward risk in the economy and interest rates.

Short-Term Profit Taking

The price of the yellow metal dipped below $2,500 per ounce on Thursday, following minutes from the FOMC suggesting greater potential for interest rate cuts through the year. Concurrently, the Bureau of Labour Statistics (BLS) reported the largest jobs figure revision since the Great Recession, increasing concerns over future growth and weighing on gold.

Some analysts have forecasted gold could reach $3,000 per ounce by mid-next year.​However, some noted that gold's price rose around 20% in 2024 but showed signs of exhaustion earlier in the week.

Demand from China has fallen after three consecutive months since their central bank did not expand gold reserves.

Following near-term weakness, longer-term factors may impact the market as geopolitical uncertainty from US elections and ongoing conflicts may provide continued safe-haven demand through the end of the year.​

Gold Retests Triangle Support

Gold's decline to $2470 per ounce may flip its ascending triangle trendline to support, potentially pushing the price to around $2610 per ounce if $2530 is breached. This is where the measured-move projection points at. However, if bulls fail to form a floor, the support at $2430 may falter, allowing prices to fall to approximately $2350 per ounce.​ Losing the regional support would suggest a peak for gold until the triangle trendline is recaptured.

Source: SpreadEx, Spot Gold

Key Takeaways

Gold prices reached record highs ahead of JHS due to US economic data pointing to safe havens. However, after the symposium began, gold declined as markets accepted that their predictions of multiple US rate cuts were excessive and Chinese demand faltered after three months of no reserve expansion. Still, geopolitical uncertainty from US elections and conflicts may sustain safe-haven demand through 2024.​