Gold Establishes New Base at $1,900
Gold has formed a new base at the $1,900 an ounce level, and if that continues to hold, record highs will be within reach, according to VanEck’s latest analysis. The precious metal has just spent the most time above $1,900 an ounce than ever before, forming a new base and averaging $1,933 per ounce year to date, said VanEck’s deputy portfolio manager Imaru Casanova.
Gold Shows Resilience Amid Market Fluctuations
Despite a strong stock market and recent U.S. dollar strength, gold has shown resilience. Gold bullion exchanged traded products outflows have subsided this year, with net inflows, albeit small, resulting in a 0.38% increase in holdings year to date. The all-time highs are within reach for gold as the Federal Reserve halts its most aggressive tightening cycle in decades.
Fed Rate Hikes and Gold’s Performance
As the Fed kept rates unchanged in a range of 5% to 5.25% following ten consecutive increases, central bank Chair Jerome Powell confirmed Wednesday that the median dot plot saw at least two more 25-bps rate hikes this year. But the market remained unconvinced, pricing in only one rate hike in July, according to the CME FedWatch Tool. May was a promising month for gold as the metal attempted to test record highs, but market optimism ended up weighing on sentiment.
Gold Miners Underperform
In the meantime, miners significantly underperformed gold last month, with the NYSE Arca Gold Miners Index (GDMNTR) and the MVIS Global Juniors Gold Miners Index (MVGDXJTR) down 8.6% and 7.3%, respectively. The sector’s overall health looks solid, with gold producers remaining committed to disciplined capital allocation, growth, shareholder returns, profitability, and healthy balance sheets. A re-rating of the gold mining equities from historically low valuations at present is well supported by the industry’s strong fundamentals.