Gold Futures Soar, Speculators Eye Multi-Year Bull Run

Key Takeaway

• Gold futures hit new record highs last week, adding 4.3%, amid speculator interest not seen since 2019.
• Expectations of looser Federal Reserve policy and geopolitical uncertainties are driving gold's appeal as a safe haven.
• Speculative net long positions in COMEX gold surged by 63,018 lots, marking the largest weekly increase since June 2019.

Gold's Record Run Continues

The price of gold has been on a remarkable upward trajectory, with futures dipping by just 0.1% on Monday after hitting a series of new record highs last week. Over the last five trading sessions, gold has surged by 4.3%, showcasing its strength in the current market environment. This rally is mirrored in the performance of exchange-traded funds (ETFs) like the SPDR Gold Shares ETF, which tracks the price of gold, indicating a broad-based investor interest in the precious metal.

Speculative Interest and Investment Environment

Speculators have been flocking to gold at a pace not seen since 2019, driven by a confluence of factors that create a favorable investment environment. Warren Patterson, head of commodities strategy at ING, attributes last week's spike in gold prices to higher-than-expected jobless rates, which have fueled speculation that the Federal Reserve might adopt a looser monetary policy. Such a shift would typically weaken the dollar and bolster gold prices. Patterson notes, "We expect gold prices to trade higher this year as safe-haven demand continues to be supportive amid geopolitical uncertainty with ongoing wars and the upcoming US election."

Bull Market Signals

Bill Baruch, president of Blue Line Futures, interprets gold's recent performance as a precursor to a "multi-year bull market in metals." He points out that while gold has been in a bull trend since 2019, other metals like silver and copper have lagged behind. However, Baruch believes that "the tide is shifting," signaling a broader rally in the metals market. The latest data from the Commodity Futures Trading Commission supports this bullish sentiment, with net longs in COMEX gold rising by 63,018 lots — the most significant weekly addition since June 2019. This marks the third consecutive week of increases, bringing total net long positions to 131,060 lots.

Gold Miners and Leveraged ETFs

Despite the commodity's strong performance, gold miners have underperformed, with the VanEck Gold Miners ETF falling 17.5% between Dec. 28 and Feb. 28. However, the sector is preparing for a bull cycle, with companies like Newmont Goldcorp positioned to benefit. For investors looking to capitalize on this trend, leveraged ETFs offer an opportunity to gain 2X leverage during a run higher, providing a way to amplify returns as the mining sector catches up with the commodity's price movements.

Street Views

• Warren Patterson, ING (Bullish on gold):

  "We expect gold prices to trade higher this year as safe-haven demand continues to be supportive amid geopolitical uncertainty with ongoing wars and the upcoming US election."

• Bill Baruch, Blue Line Futures (Bullish on metals):

  "Gold’s move was 'the canary in the mine,' signifying the start of a multi-year bull market in metals. Although gold has been in a bull trend since 2019, silver, copper and others have struggled. The tide is shifting. Be ready."