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Gold entering the summer doldrums - Heraeus

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(Kitco News) - One of the world’s largest precious metals firms is warning investors that the gold market could have peaked in the near-term.

In a report published Tuesday, Heraeus Precious Metals said that there are technical signs that gold is running out of momentum. The comments come as gold prices hold support above $1,700 an ounce. June gold futures last traded at $1,711.80 an ounce, relatively unchanged on the day.

Along with the technical outlook, the analysts said that speculative interest in the gold market is looking a little crowded.

“The last time the speculative net long position reached record highs, the gold price fell by 18% over the next five months. Typical seasonality in the gold price indicates the price could move lower, or at least sideways, over the summer,” the analysts said.

The precious metals firm also said that a lot of bad news has been priced into financial markets and as some nations start to ease lockdown restrictions, optimism could start to pick up, dulling some of gold’s safe-haven luster

“It seems a great deal of uncertainty surrounding the state of the economy is already priced in and, with lockdowns beginning to be brought to an end, the price could pull back,” the analysts said.

Although the gold market appears to have reached a peak in the near-term the analysts said that they still sees plenty of upside for the metal in the long-term.

“Interest rates close to zero continue to favor the upside for gold by keeping real rates in negative territory for now,” the analysts said.

The analysts said that they also see rising geopolitical risks support gold prices after the summer doldrums ends.

“Trump’s erratic handling of the COVID-19 pandemic means the presidential race is now looking very different,” the analysts said. “Political uncertainty is bullish for gold and could see modest inflows to U.S. funds as the year progresses, but for now the price appears to be near a top.”

Looking at the silver market, Heraeus said that ir does not expect to see a major price recovery in the near-term.

The silver market has seen significant supply disruption as silver mines in major jurisdictions have been forced to shut down as governments force all nonessential companies to close down in an attempt to slow the COVID-19 pandemic. However, the analysts noted that demand disruption has been enough to offset the drop in supply.

“Gold remains the metal favored by investors, so silver’s fortunes might not improve any time soon,” the analysts said.

Despite the lackluster outlook, silver is significantly outperforming gold prices Tuesday. July silver futures last traded at $15.09 an ounce, up 2% on the day.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.