Gold futures leap closer to record highs in one fell swoop

Prices for most-active gold futures last reached a record-high settlement on Dec. 1 at $2,089.70. The intraday record is $2,152.30 from Dec. 4.

Silver also rallied, with its March futures contract
SIH24,
+6.76%

SI00,
+6.76%
up $1.47, or 6.4%, to settle at $24.39 an ounce — the biggest daily percentage rise since March 2023. With Thursday’s gain, silver futures have turned higher for the year, up 1.4%.

Overall, the “sudden death of ‘higher for longer’ at the U.S. Fed has only taken gold back to breakeven for December so far, and it leaves the market $100 below last week’s blowoff top,” said Adrian Ash, director of research at BullionVault. “That’s more than offset the speed of gold’s rebound, deterring fresh profit-taking while finding an uptick in new inflows.”

On Wednesday, the Fed penciled in three rate cuts in 2024 instead of two that were projected in September. The Fed also softened its tightening bias by saying they were mulling the need for “any” more hikes.

Then Fed Chairman Jerome Powell said Fed officials were starting to discuss when to cut rates.

Powell “dramatically changed his tone” Wednesday and hinted at three rate cuts in 2024, which is “decisively bullish for commodities as a whole, but especially gold, being that it’s so sensitive to interest rate volatility,” said Adam Koos, president at Libertas Wealth Management Group.

The big risk for gold prices, however, looking into next year, is that “speculators run ahead of themselves, discounting extra Fed rate cuts which don’t come through until everyone has run back the other way,” said BullionVault’s Ash.

For now, the yellow metal is “beating its head up against the $2,060 ceiling, which represents all-time-highs,” he told MarketWatch. That’s significant because “it represents a ceiling over which gold hasn’t been able to break through for more than three full years now.”

“Each and every time gold has tried to crack this (seemingly) concrete ceiling, it gets knocked back down,” said Koos.

“If prices can break out above $2,060, hold there and at the bare minimum, chop sideways for a few days or even a couple of weeks, the sellers would dry up and prices would be free to float northward,” he said.

Until gold prices see that decisive “break and hold,” however, Koos said he doesn’t expect the rally to hold.

Instead, with the holidays coming up and traders heading home for their winter vacations, he expects “volatility to calm down and price action to become less meaningful” — at least until after Jan. 1, 2024.