Gold Making Wall Street Nervous
Gold’s stellar year is starting to make some Wall Street strategists uneasy, at least in the short term.
On Wednesday, gold futures hit a new all-time high, closing at $2,684.7 per ounce, marking the sixth consecutive day of gains. By midday Thursday, gold futures were continuing to rise. Spot gold is also at record levels, up about 29% for the year so far.
The rally is driven by increased buying by global central banks and the Federal Reserve’s rate cuts, which have historically benefited gold prices. These factors could push gold prices higher into 2025 and beyond. However, the strength of this year's surge is starting to concern even some bullish analysts.
For instance, Bank of America suggested in a report on Wednesday that gold prices could reach $3,000 per ounce within the next 12 to 18 months. However, Bank of America ETF strategist Jared Woodard also cautioned that gold might be “tactically overbought.”
“Although the long-term outlook is positive, there are some risks in the short term. Prices are currently 15% above the 200-day moving average... Historically, returns tend to flatten out 1-6 months after reaching such extremes,” Woodard noted.
Similarly, UBS strategist Wayne Gordon raised his forecast for gold to reach $2,900 per ounce within the next year but indicated that a short-term correction could be on the horizon.
“Given the speed and scale of the rally, some price consolidation seems likely in the short term. However, pullbacks this year have been shallow and brief, forcing investors to chase the market upward,” Gordon said in a client note on Thursday.
A potential pullback could provide an opportunity for tactical traders. On Wednesday, BTIG strategist Jonathan Krinsky advised investors to consider taking profits now and buying again during any dips.
“For gold, a pullback into the $225-$234 range could be a good point to re-enter. This would represent a 5-8% decline,” Krinsky said, referring to the SPDR Gold Shares fund, which is backed by physical gold.