Gold prices suffered a hefty decline Monday, losing more than 3% as trade tensions ease, but some strategists say that it’s not time yet to take profits — and that the precious metal may still rally to fresh record highs.
“The progress made in trade talks between the U.S. and China over the weekend significantly dials back trade tensions, stoking risk appetite and sapping gold’s haven bid,” Peter Grant, vice president and senior metals strategist at Zaner Metals, told MarketWatch.
The market, however, will want to see additional progress toward trade deals with China and other major trading partners, so the downside for gold is “limited” from here, at least initially, he said. The May 1 low of $3,204.91 has held and is “now reinforced as important short-term support.”
On Monday, gold for June delivery GC00 GCM25 fell $116, or 3.5%, to settle at $2,228 an ounce on Comex. That was the biggest daily percentage loss for a most-active contract since April 23 and the lowest finish since May 1, according to Dow Jones Market Data.
In a note Monday, chief global investment strategist Tim Hayes and analyst London Stockton, both at Ned Davis Research, said they’ve maintained a bullish position for most of the time since gold hit a cyclical bottom in the second half of 2022. Strength in the precious metal, which has gained 25% this year versus total returns of 2% for the Barclays Aggregate Total Return Bond Index, has also led to “complacency and overbought conditions,” they said.
Gold has seen a historical trendline growth of 6% per annum, and it’s risen “so far above the trendline that it is entering the top 20% of readings,” Hayes and Stockton said. “This doesn’t mean that gold will turn around right away — it does warn that the gold trade is a crowded trade with little margin for error if the conditions supporting gold start to worsen.”
But “now is not that time” to take profits in gold, they said, noting that their approach right now is to hold gold.
