Gold prices recover after brief decline
The anticipated bottom and trend reversal in the gold market came to fruition with the last US interest rate decision in mid-December. This marked the end of a two-month correction period for gold as it hit a low of USD 2,585 on December 18, 2024. Since the start of the year, bullish sentiment has taken hold, propelling gold prices upward at a rapid pace. Surpassing the all-time high from late October at USD 2,790 proved to be a minor obstacle as a new peak of USD 2,942 was achieved three weeks ago. A slight dip to around USD 2,940 led to a brief consolidation period around the USD 2,900 mark before a breakout to a new high of USD 2,956 was achieved. This represented a substantial 12.50% increase in value since the beginning of the year.
A significant factor contributing to this upward movement was the transfer of large quantities of physical gold from London to New York. London’s gold market has been facing challenges due to this trend, with 151 tons being withdrawn from its vaults in January alone. The relocation of 12.2 million ounces of gold to COMEX warehouses in the US over the past two months further exacerbated supply shortages in London, leading to delivery delays. The demand for gold as a safe haven, geopolitical tensions, inflation fears, and buying frenzies during the Chinese New Year have all contributed to this situation. The fear of potential US trade tariffs on precious metals and an audit of US gold reserves have also factored into the mass transfer of gold from London to New York.
The shift of gold reserves has resulted in a critical supply situation in London, with delivery times extending from days to four to eight weeks. The London Bullion Market Association reported that approximately 8,535 tons of gold stocks were available at the end of January. Despite reassurances from the LBMA, market participants remain wary.
After a brief but deep pullback below the USD 2,900 threshold, gold quickly rebounded to around USD 2,930, signaling a potential end to the pullback phase. The weekly chart shows a gradual consolidation period after the breakout in January, leading to successive new all-time highs in gold price. The recent pullbacks to test resistance at the USD 2,942-USD 2,956 zone have caused minor interruptions but have not derailed the overall bullish momentum in gold’s uptrend. The technical indicators suggest that a larger correction may be possible in the future, but the weekly chart remains bullish, indicating a potential rise above USD 3,000 as the primary scenario.
The daily chart reflects a v-shaped recovery in gold, showcasing the market’s resilience after the recent pullback. The expiration of the February gold futures contract triggered increased market activity as professional traders rolled over or delivered their contracts, leading to potential price manipulation. Despite these fluctuations, the overall trend in the gold market remains positive, with key support levels keeping the momentum intact for a potential upward surge.
