Macro

Gold Hits Record $2,308 Amid Economic Fears, FCX Soars

Gold futures hit record $2,308.80 amid rate cut expectations and strong global demand, soaring 10.5% this year.

By Bill Bullington

4/3, 12:54 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Freeport-McMoRan, Inc.
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Key Takeaway

  • Gold reached all-time highs, signaling a significant market shift and investor interest in safe-haven assets amid economic uncertainties.
  • Freeport-McMoRan Inc. (FCX) hit a multi-year high at $47.19, with potential to break its all-time high of $50.33, indicating strong momentum in copper as well.
  • Massive liquidity injections and geopolitical tensions have failed to significantly move the gold market until now, underscoring the metal's renewed appeal as a store of value.

Gold's Meteoric Rise

Gold futures soared to an all-time high of $2,308.80 per troy ounce, marking a significant milestone in the precious metal's journey. This year, gold has seen a remarkable surge of 10.5%, with a notable increase of 3.5% over the past five days alone. This rally is particularly impressive given the downturns in both the stock and bond markets, with the Dow Jones Industrial Average experiencing declines. Analyst Achilleas Georgolopoulos from broker XM commented on gold's resilience, stating, "Gold continues to defy gravity... It is showing unprecedented strength and manages to rally under every market scenario."

Contradictory Catalysts at Play

The climb in gold prices has been fueled by expectations of Federal Reserve rate cuts, which typically depress bond yields and the dollar, thereby benefiting gold. However, even as inflationary signs in economic data put these rate-cut bets under pressure, gold's ascent continued. This suggests a strong buying appetite from sovereigns aiming to diversify their dollar holdings. Kathleen Brooks of broker XTB highlighted potential overextension, noting, "Warning signs are flashing... open interest on gold contracts appears to have peaked and the gold price is now 15% above its 200-day simple moving average."

Mining Stocks and Global Demand

The surge in gold prices has significantly lifted the values of gold mining companies, with the VanEck Gold Miners ETF seeing substantial gains. Top performers in March 2024 included Equinox Gold Corp. and Coeur Mining, Inc., among others. This rally in gold prices and mining stocks is attributed to a mix of factors, including central bank buying, particularly from China, and retail buying in countries like India. Francisco Blanch from Bank of America noted that medium-term debt dynamics and geopolitical rifts are at "the heart of the run-up in gold."

Street Views

  • Michael Ballanger, GGM Advisory Inc. (Bullish on gold and Freeport-McMoRan Inc.):

    "I surmised that the steps taken by our elected visionaries (politicians) would be outdone only by the inflationary exploits of the un-elected visionaries (central bankers) that would result in a massive rise in the cost of goods and services, rendering gold and silver as worthwhile ventures." "In fact, I see $2,370 coming as early as next month because when I look at the point-and-figure diagram, this move should mirror in amplitude the same move it had the first time gold moved above $2,200, which was a $200 advance."