Gold’s rollercoster ride

[View this email in your browser]( [Youtube]( [Kitco Metals]( Editor's Picks [@neils_C]( It has been a rollercoaster week for the [gold]( market. [Bullish momentum triggered buy signals in an illiquid market early in the Asian session on Monday, driving the precious metal to an all-time high of $2,152.30 an ounce.]( However, like any parabolic move, the rally proved to be unsustainable, and the selling momentum triggered some buy stops; now, heading into the weekend, the market finds itself down roughly 3% from last week. It’s not surprising that gold saw some major selling as prices passed $2,100 an ounce. Although there is a significant long-term bullish sentiment in the marketplace, it would be foolish to think that investors shouldn’t take profits after hitting a major projection level. At its early morning peak at $1,250 an ounce, gold prices were up more than 19% from last year. Even before Monday’s blow-off top, many analysts were warning investors that the market was in overbought territory, so this selloff is not surprising. This is the same price action we saw in August 2020 when gold established its previous all-time high. The volatility we saw this past week, as prices swung in a $141 range, was the biggest since then. However, what makes this new breakout more exciting is that it comes as the precious metal continues to face significant headwinds. The U.S. dollar Index remains relatively elevated as it ends the week around 104 points; at the same time, the yield on U.S. 10-year treasuries is holding above 4%, even as it has dropped from its peak of 5% in October. Momentum in the gold market has been driven by rising expectations that the Federal Reserve will start to cut interest rates in the first quarter of next year. Markets see a nearly 60% chance of a rate cut by March. Unfortunately, the gold market has been a terrible indicator for the Federal Reserve’s much-anticipated pivot and the enthusiasm we saw at the start of the week has proven to be a little premature, especially after Friday’s employment report. [According to the Bureau of Labor Statistics, the U.S. economy created 199,000 jobs, the unemployment rate fell to 3.7% and wages increased by 0.4%]( all above expectations. This is not an environment in which the Federal Reserve will cut rates. The U.S. central bank has been clear that it needs to see some slack in the labor market before it is confident that it has inflation under control. While gold has been a little early off the starting blocks, we can see its exciting potential when the Federal Reserve starts to cut interest rates. For many analysts and significant banks, $2,100 in 2024 is just the start. This past week, the Kitco News team has been listening to and reading a significant number of 2024 outlook presentations; one key theme has been how gold has defied the odds as major investors have remained on the sidelines of the market. Even after Monday’s rally to all-time highs, demand for gold-backed exchange-traded funds has been lackluster at best. However, according to many analysts, investors will jump into the market when the Federal Reserve finally starts to cut rates. This shift in investor sentiment will eventually lead to sustainable higher prices, but it probably won’t happen in March. Have a great weekend. Neils C. Editor's picks [U.S. Hard Landing, Savings Crisis, Default Cycle Coming in 2024 - David Rosenberg](. 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