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Gold futures edged higher for the month of May despite turning lower on Friday, while the metal has dropped 4.5% from their highest point reached on May 20, reflecting recent economic data showing stubborn inflation.
Recent Economic Data and Gold Movement
Data released on Friday from April’s Personal Consumption Expenditures price index came in roughly as expected – up 0.3% in April and 2.7% in the 12 months through March – giving gold little reason to jump. This suggests that the gold market is currently being influenced by economic indicators.
“Gold is down despite the friendly PCE report and softer consumer spending, which could suggest near-term exhaustion in what has been a remarkable rally in 2024,” independent metals trader Tai Wong told Reuters. This indicates that market sentiment may be shifting due to various factors affecting gold prices.
“Multiple Fed governors have said that it will take a few months of softer inflation to convince them it’s safe to cut rates,” Wong added, showcasing the impact of central bank policies on the gold market.
Market Performance and Insights
Front-month Comex gold for June delivery finished +1.4% for May after falling 0.8% on Friday to $2,322.90/oz, while front-month June silver settled +14.8% to $30.297/oz this month including a 3.5% decline on Friday. This highlights the volatility in precious metals markets and the importance of monitoring daily price movements.
Commodity prices still have room to rally, with rising demand and deepening supply shortages in oil and copper likely to keep prices well-supported over the next 6-12 months, UBS Global Wealth Management said this week, according to Marketwatch.
UBS Insights and Gold Forecast
“We like strategies that generate yield in gold and crude oil, and recommend positioning for further upside in copper,” the UBS team of analysts led by Solita Marcelli wrote. This strategic approach suggests that investors should consider diversifying their portfolios to capitalize on potential opportunities in the commodities market.
Central bank purchases should continue to support gold for the rest of 2024, while demand for the metal as hedges should remain “healthy” with geopolitical risk in the Middle East and between the U.S. and China, Marcelli and her team said. This underscores the geopolitical factors impacting the gold market and the importance of considering global events in investment decisions.
UBS recently raised its year-end price forecast for gold to $2,600/oz and recommended investors buy on dips at ~$2,300 or below, providing a specific price target for investors to consider when entering the gold market.
