Gold’s all-time highs remain out of reach... for now

[View this email in your browser]( [Youtube]( [Kitco Metals]( Editor's Picks [@neils_C]( The gold market saw solid bullish momentum this past week as prices bounced off a three-week low; however, a sustainable break above $2,000 an ounce remains elusive. Gold’s price action shows how much potential the precious metal has in the right economic environment; unfortunately, many analysts have said that conditions for a rally to all-time highs are not yet in place. Gold’s 2% rally this week kicked off after the U.S. [Consumer Price Index]( showed annual inflation rising 3.2% in October. At the same time, core inflation rose 4.0%. This was the smallest 12-month rise since September 2021 That was just the start; economic data Thursday showed producer inflation, a leading indicator for consumer prices, dropped 0.5% in October. It was the biggest one-month decline since April 2020. For the year, [PPI]( 1.3%. These weak inflation readings have prompted investors to once again focus on a potential shift in U.S. monetary policy. According to the CME Fedwatch Tool, markets see an 87% chance of a rate cut by May. Last month, markets saw only a 23% chance of a rate cut. The market’s new target for a potential rate cut feels much more accurate than its previous pivot projections. However, while inflation is dropping, the economy remains reasonably resilient, which means the gold market will continue to face some pretty tough talk from the Federal Reserve. Powell has already been clear that it will take more than one or two data points to change the Fed’s tightening bias. For this reason, gold’s all-time highs will remain just out of reach. But that is not a reason to give up on the precious metal. This just means that investors need to be patient and look for tactical buying opportunities. The one thing that has been missing from this gold rally has been institutional investors; however, that is slowly starting to change and this momentum will only pick up as we get closer to the Federal Reserve’s May meeting. Billionaire investor [David Einhorn has once again jumped into the gold market.]( This week, his hedge fund, Greenlight Capital, submitted its 13-F filing for the third quarter. The Fund’s stake in SPDR Gold Shares (NYSE: GLD), the world’s largest gold-backed exchange-traded fund, jumped by more than 89%. The hedge fund invested $34.9 million in gold in the third quarter and its position in GLD now represents 4.2% of its total portfolio. According to reports, this is a record amount of gold for the hedge fund. It’s not surprising that Greenlight is looking for some insurance, as Einhorn says he is concerned about market conditions. He noted that rising geopolitical uncertainty will increase oil prices, ultimately leading to a recession. At the same time, a recession is not the only risk the U.S. economy faces. Analysts continue to raise concerns about the burgeoning U.S. government debt. This crisis alone will push gold prices to new all-time highs. Have a great weekend and for our American readers happy Thanksgiving next week. Neils C. 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