Unsettled Over Q2: Second Quarter 2024 Gold Report

Gold returned 2.93% in Q2 2024, starting the quarter at 2264.50 USD and ending at 2330.90 USD, per the LBMA fix PM price. Year-to-date, gold displayed a strong performance of 12.74%, depicting a rugged geopolitical landscape, which preserved caution amongst individual and institutional investors.

Since the end of the first quarter 2024, gold has reached new highs and sustained high price levels. Despite getting over 2300 USD per troy ounce in early April and staying above this mark for the whole quarter, we saw some impressive sell-offs. Those sell-offs have unambiguous explanations, but we also believe that gold is shifting to be a more volatile and speculative asset compared to what it has historically been.

One obvious example is the famous US club retailer Costco selling retail gold products for $200 million per month, according to a WellsFargo estimate. This increasing interest in gold among retail buyers highlights the overall caution among investors.

As previously said, we witnessed major gold price declines during Q2. The first one occurred in April 22nd, where gold lost around 4% in one day. The correction was seemingly fueled by a strengthening US dollar and lesser risk aversion levels. It also came after an all time high on April 12th.

On May 22nd to 23rd, a second gold price relapse happened where gold lost around 3.8%. Once again, this slip in gold price happens after an all-time high that was reach on May 20th when gold touched 2450 USD per ounce. As an explanation, profits-taking and Federal reserve declaration to maintain interest rates fueled this sudden decline.

The drop in gold prices on June 7th, 2024, is linked to China's central bank halting its gold purchases. This significant event marked the end of an 18-month buying spree by the People's Bank of China (PBOC), which had been a major driver of the recent gold market rallies. The PBOC's decision not to add to its gold reserves in May caused a nearly 2% drop in gold prices that day, reversing nearly all the gains for the week.

In addition to China's cessation of gold purchases, stronger-than-expected U.S. jobs data released on the same day further exacerbated the decline. The robust job growth data reduced market expectations for imminent Federal Reserve rate cuts, which in turn led to higher Treasury yields and a stronger dollar. These factors combined to put additional downward pressure on gold prices, which fell as much as 4.1%, marking the most significant single-day drop in over two years

Overall, this quarter was marked by a positive sentiment on gold but the environment remained choppy, with gold displaying higher volatility than the S&P 500, at 15.0% against 10.6%. It is likely, given the current economic and geopolitical climate, there’s a likelihood that gold prices are not done tackling all-time highs during Q3 2024.

By the year end, we will witness changes in the political landscape mainly with France, currently undergoing a reset in its government and later this year with the US elections, which will not only influence the gold price, but the entire financial and political ecosystem…

1. Gold performance is based on PM LBMA price listings. If not available, the AM price is taken into account.

2. Historical performance on the selected indexes, can differ slightly from actual performance as it is computed on weekly data.

Sources: Bloomberg & LBMA.org