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Barely a Ripple as Gold Returns to $1,900, Then Drops Back

CommoditiesMay 26, 2021 02:38PM ET
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By Barani Krishnan - So much for the brouhaha over $1,900 gold.

Barely a day after recapturing the price point it lost 20 weeks ago, gold was back on Wednesday in $1,800-an-ounce territory. Just 24 hours earlier, multiple headlines were concocted as the yellow metal hit $1,900 the first time since January, setting up expectations for the next all-important target of $2,000.

Wednesday’s performance quickly deflated that optimism, with gold longs barely trying to push the envelope despite the relative tame performance of key rivals such as the 10-year Treasury yield, the Dollar Index and Bitcoin.

Gold for June delivery on New York’s Comex settled the day’s trade up $3.20, or 0.2%, at $1,901.20. The session high was $1,913.25, a peak since Jan. 8.

But almost immediately after that settlement, it fell below the $1,900 mark. By 2:23 PM ET (18:23 GMT), it was down $4.15, or 0.2%, at $1,893.85.

The spot price of gold, reflective of real-time trades in bullion, hit an intraday high of $1,912.79, before falling to 1,893.91 by 2:23 PM.

Traders and fund managers sometimes decide on the direction for gold by looking at the spot price — which reflects bullion for prompt delivery — instead of futures.

Some, like TD Securities, remained hopeful of another imminent breakout in gold.

“Gold is also underperforming against periods of high inflation, which fuels our conviction for upside risks in the yellow metal, as much as the Fed sticks to their FAIT framework,” TD Securities said, referring to the Flexible Average Inflation Targeting that moderates the traditional 2% inflation target of the U.S. central bank.

Conviction has become a rare commodity in gold, with the average long investor struggling to stay true to the yellow metal through its travails of the past six months.

Since January, gold has been on a tough ride that actually began in August last year — when it came off record highs above $2,000 and meandered for a few months before stumbling into a systemic decay from November, when the first breakthroughs in COVID-19 vaccine efficiencies were announced. At one point, gold raked a near 11-month bottom at under $1,674.

To many, gold’s return to above $1,900 had been logical, overdue, and even remarkable — considering the tortuous journey it’s been on this year.

But after so many false starts during mini rallies in the $1,700 and $1,800 levels, skepticism will understandably be overwhelming for anyone who had speculated with gold longs in recent months.

Should gold regain its $1,900 footing, it will likely move up to $1,922, then $1,958, making what would be defined as “a triple top formation,” before plunging to between $1,848 and $1,828, said Sunil Kumar Dixit of S.K. Dixit Charting in Kolkata, India.

“To me, the odds of a pre-$1,960 plunge are a lot greater than a promising rally beyond $2,000,” said Dixit.

Barely a Ripple as Gold Returns to $1,900, Then Drops Back

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Sol Weinberg
Sol Weinberg May 26, 2021 2:12PM ET
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Bull market climbs a wall of worry.  In time $2000 an oz will be history
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