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(Kitco News) With gold rallying to near all-time highs in April, Google searches for "how to buy gold" soared to record levels in the U.S., according to Google Trends data going back almost 20 years ago.
The phrase hit record-high popularity this month. The search inquiry was not even that high when gold hit new records of above $2,050 an ounce in 2020.
And the last time interest was this widespread in the U.S. was in August 2011, when prices breached $1,900 an ounce for the first time. After that, gold peaked and remained lower until the next rally that took prices to new highs in 2020. Google Trends' data goes back to 2004.
The gold market has been seeing a massive rally that kicked off with the banking crisis in March. Year-to-date, spot gold is up nearly 10% and was last at $2,008.70.
Since hitting a 13-month high two weeks ago, gold has been trading around the $2,000 level as investors sell the rallies and buy the dips.
All eyes are on the Federal Reserve's potential pause after its expected 25-basis-point hike in May. Also, any U.S. dollar weakness has been playing a big role in driving gold higher, according to analysts.
"Repeated signs of cooling price pressures and disappointing U.S. economic data could add more fuel to expectations around the Fed pausing rate hikes and eventually cutting down the road," said FXTM's senior research analyst Lukman Otunuga.
This week, investors are paying close attention to the U.S. Q1 GDP data and core PCE price index, which is the Fed's preferred measure of inflation. The releases are scheduled for Thursday and Friday, respectively.
"U.S. economic growth in the first quarter is expected to moderate from the 2.6% in the previous quarter while persistent price pressures may be present in Friday's core PCE report. Ultimately, if the data supports expectations around the Fed taking a pause from rate hikes after May, this may drag the dollar lower," Otunuga noted Tuesday.
For the time being, gold is stuck in a tight range due to the uncertainty surrounding the direction of the Fed's future monetary policy decision.
"With markets now expecting U.S. rates to peak in the summer and a rate cut by December, gold has the thumbs up to push higher in the longer term," added Otunuga. "Price action suggests that a fresh catalyst is needed to trigger a bullish or bearish breakout. A strong move above $2,000 may inspire a push towards $2,025 and $2,048. If prices remain below $2,000, gold could test $1,950 and $1,900."
Many analysts expect new record-high prices once markets settle on when the Fed pivot is actually coming this year.
"We see gold price potential parallels to the financial crisis, which would place the next key round number resistance toward $3,000," said Bloomberg Intelligence senior macro strategist Mike McGlone. "The metal started 2008 around $850 and peaked in 2011 at about $1,900."
And despite a serious risk of a selloff in the second quarter, gold is likely to make a "sustained" move to $2,100 later this year, said TD Securities global head of commodity strategy Bart Melek.
"Risks are to the upside, if monetary authorities are seen to be pivoting toward dovishness before inflation nears target in a meaningful way. Indeed, positioning suggests that the discretionary investor community may well be a catalyst for prices to move materially above our year-end target, as they have plenty of room to grow long exposure," Melek said.
There are a number of drivers supporting gold at these elevated levels — lower nominal and real rates, U.S. dollar concerns, strong physical buying, and continued interest from central banks.
On top of that, there is the unresolved debt ceiling debate happening, which could add to volatility and upward pressure on gold, said MKS PAMP head of metals strategy Nicky Shiels.
"Given the unprecedented political ugliness the past 2 years, some (Gold) risk premium needs to be priced in for this low probability (but high impact) potential event (that probably explains why Gold is holding >$1,950 despite the renewed hawkish tone)," Shiels said on Monday. "Playing chicken with a trillion US$ certainly doesn't inject any market certainty. Gold bulls have not forgotten that the reality is that America is no longer meeting obligations to its citizens, America has a spending problem and America's tax revenues cover only about 4/5th of government spending."
Plus, the banking crisis might not be over, with First Republic Bank reporting a drop of more than $100 billion in deposits during the first quarter. Back in March, there were fears that First Republic Bank could have been the third bank to fail after the collapse of Silicon Valley Bank and Signature Bank.
