Gold Digger: Precious metal steady amid Fed’s muddy yellow waters

•  Gold price consolidates as more inflation-influencing US economic data looms on Friday
• The World Gold Council sees positive narrative for gold remaining intact this year
• Top performing ASX goldies this week led by: SIH, CBY, KTA

This week in gold. The Fed’s JPow spoke. Saw no sign of stag, no sign of ‘flation. The precious yellow metal pulled back a tad. A mere bump in the road? Further golden days ahead, predict analysts.

Let’s look a little closer, using slightly longer sentences here and there…

The price of gold in US dollars appears to have stabilised and held its ground at the $2,300 mark. At the time of thinking about the beer fridge late on an Aussie Friday afternoon, it’s changing hands for US$2,307.

In plastic fantastic Aussie dollars, it’s kicking around $3,511, down about $200 from the ATH of a couple of weeks ago, but still in fairly fine fettle.

Here’s a chart…

What are some regular gold-watching analysts saying about the slight pullback and consolidation? Pretty much what we said further above.

That said, the US Fed’s latest FOMC meeting breakdown and message to the markets this week did muddy the waters just slightly with a bit of a bet each way on inflation and a sweet’n’sour tone.

The next catalyst from the always influential US of A is imminent, and it’s the monthly US (nonfarm) jobs data, which should (well maybe) provide some clarity about the strength of the US economy.

As Bloomberg writes:

“The nonfarm payrolls report may show a slower pace of gains, which could help bolster bets on rate cuts. Lower rates are typically positive for the non-interest bearing metal.”

Gold trajectory still intact?

The Fed’s latest unchanged interest rates non-move initially offered some respite for markets, including gold. The added statement from Powell was less hawkish than perhaps expected, too.

That, however, according to European editor of FXStreet and analyst Joaquin Monfort, saw gold dip on improved market sentiment and lower safe-haven demand.

But gold can ride the coattails of improved market sentiment, too, right? Yep – it’s a complicated old rock sometimes.

“Gold bulls bid up the price after the Fed decided to leave interest rates unchanged and to slow the pace of reduction of its US Treasury holdings, a mildly dovish move as it unwinds quantitative tightening,” added Monfort.

Gold’s inflation-hedge narrative is still one of its strongest, though, and the FXStreet analyst noted the pinch of hawkishness added into the Fedspeak soup that stated “in recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective”.

Essentially, though, the message of: no rate cuts in the near term, but no rate hikes likely, either, has markets, including gold, perhaps in a state of limbo for now.

Monfort, though, sees the overall, medium-to-long term upside trajectory as remaining well in play.

The World Gold Council says…

… that global desire for gold remains strong, and in fact, gold demand has just marked its strongest quarter in eight years – up 3% year on year.

That’s been led by “healthy investment” from the OTC (over the counter) market, and “persistent central bank buying” as well as higher demand from Asian  buyers.

The World Gold Council, by the way, is a prominent and highly influential global member organisation of gold analysts and experts generally championing the role of gold as a strategic asset.

Aussies are letting the side down, though

In its Gold Demand Trends Q1 2024 report, the WGC also noted, interestingly, that: “Australia was an outlier, recording its lowest quarter on record for gold consumption, though ETF holdings remained relatively stable”.

At 4.3t, Australia’s gold consumption came down 37% from Q1 2023, including a halving in demand for bar and coins and a 15% drop in jewellery consumption over that time.

Cheapskates, us lot so far this year, then.

Shaokai Fan, Head of Asia-Pacific and Global Head of Central Banks at the WGC, commented:

“Australians, like most western investors, proved price sensitive and did not buy into the recent gold rally which saw the A$ price of gold jump 11.9% over the quarter, ending at A$3,397/oz. Continued momentum has since seen gold rise 6.3% in Q2 to A$3597.9/oz2, contributing to a total 2024 YTD rise of 18.2%.

“The decline in demand for gold ETFs was more modest as Australian investors held their gold ETFs relatively steady in Q1. The regional gold ETF holdings reached 40.5t in March, a mild 0.4t loss in the quarter and a 0.8t decline y/y.”

But, overall, things are looking good for rest of 2024

As for global (particularly led by China) central banks, though, as mentioned earlier at least they’re continuing to pick up the slack, adding 290t to official global holdings during the quarter.

“Consistent and substantial purchases by the official sector highlight gold’s importance in international reserve portfolios amidst market volatility and increased risk,” noted the World Gold Council.

In addition, demand for gold in technology recovered 10% year-on-year driven by the AI boom in the electronics sector.

Louise Street, Senior Markets Analyst at the World Gold Council, said:

“Since March, the gold price has climbed to all-time highs, despite traditional headwinds of a strong US dollar and interest rates that are proving to be ‘higher for longer’.

“Typically, investors in Eastern markets are more responsive to the price, waiting for a dip to buy, whereas Western investors have historically been attracted to a rising price, tending to buy into the rally.

“In Q1, we saw those roles reversed with investment demand in markets such as China and India growing considerably as the gold price surged,” continued Street, before adding:

“Looking ahead, 2024 is likely to produce a much stronger return for gold than we anticipated at the beginning of the year, based on its recent performance.

“Should the price level off in the coming months, some price-sensitive buyers may re-enter the market and investors will continue to look to gold for a safe haven asset as they seek clarity around rate cuts and election results.”

ASX Winners & Losers

Here’s how ASX-listed precious metals stocks are performing, circa 4pm May 3:

Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.

Stocks missing from this list? Please email rob.badman@stockhead.com.au

Notable weekly gainers

Sihayo Gold (ASX:SIH) +150%

Canterbury Resources (ASX:CBY) +96%

Krakatoa Resources (ASX:KTA) +73%

Emu (ASX:EMU) +73%

Lycaon Resources (ASX:LYN) +43%