(Kitco News) - The lack of clear drivers should keep gold prices rangebound near $2,000, while silver could fall below $22 per ounce if it fails to find support on the weekly charts, according to precious metals analysts at Heraeus.
“Overall, the gold price has lacked impetus so far in 2024 and investors have continued in their negative attitude towards ETFs, particularly as upside price risk from an early-2024 interest rate cut has faded,” they wrote in their latest precious metals report. “Gold ETF products have seen net outflows of 1,932 koz since the beginning of the year, with only a couple of days with positive inflows to note. Outflows year-to-date are equal to 2% of total holdings at the end of 2023, and as of Friday stood at a four-year low.”
Given the absence of any drivers for positive price action, the analysts said they expect gold to continue hovering around $2,000 per ounce for the time being. “However, the outlook for 2024 as a whole remains bullish thanks to interest rate cuts that, although now likely to be farther away than initially thought, are still very much on the cards,” they added. “When ETF investors do jump back in, this should provide a good tailwind for the gold price.”
Heraeus is also keeping a close eye on China’s physical gold market, and they noted that buyers in the world’s largest precious metals market appear to be changing their strategy.
“Gold trading volumes and withdrawals from the Shanghai Gold Exchange in January were the largest since January 2016,” they said, noting that the 271 tonnes withdrawn during the month constituted the second-highest monthly total since 2008.
“This activity, as previously noted, is likely to be caused by wholesalers stocking up before the Lunar New Year holiday,” they said. “Historically, spikes in withdrawals and retail demand typically coincide with dips in the gold price, yet January’s activity spike comes with the local yuan gold price remaining stubbornly high. Despite some headwinds to demand, such as the forecast for fewer marriages, the fact that apparent demand is robust under this condition is a positive indicator for retail gold demand in China this year. As of Friday, the local gold price stood at CN14,564, just 1.9% below the record set in 2023.”
Spot gold traded in a narrow range between $2,020 and $2,027 in the Asian and early European session, but fell to a session just below $2,012 at 11 am EST. It has since mounted a modest recovery, last trading at $2,015.41 at the time of writing.
Turning to silver, the analysts pointed out that sales of silver coins outstripped those of gold at the major mints last month. “January tends to be a strong month for both gold and silver bullion sales with the release of new-year mintages, and a 2.9% decline in the silver price seems to have helped,” they said. “From the US Mint, American Eagle silver coin sales grew by 24% year-on-year to 4.9 moz. Meanwhile, sales of American Eagle gold coins fell by 25% against sales in January 2023, to 123 koz, the lowest sales volume in the post-Covid era.”
Meanwhile, the Perth Mint saw lower demand for both gold and silver, but silver bullion products still outperformed gold. “Sales of silver coins and minted bars fell by 38% year-on-year to 769 koz, but gold product sales dropped by 62% to a nine-year low for January of 24.7 koz,” they noted. “Demand from the Perth Mint has been shrinking since the second half of 2022, despite a decline in apparent premiums from bullion dealers in that time.”
Looking at price action, the analysts said silver will need to find support above $22 per ounce on the weekly chart “or it could fall further towards $21.50/oz.”
Silver prices are seeing a dramatic start to the week. After a slow climb in overnight trading from $22.640 to a session high of $23.076 just before 8:30 am EST, spot silver sold off very sharply, dropping to session lows at $22.518 just one hour later. It last traded at $22.647 at the time of writing.