(Kitco News) - Gold’s streak of eight consecutive weekly gains, during which prices repeatedly hit record highs, has ended. Prices are expected to close the week down more than 3%.
Despite gold’s biggest weekly decline since the November U.S. elections, analysts remain optimistic about the precious metal’s long-term prospects. The pullback is not entirely unexpected, as many analysts had warned that the market was overcrowded and overdue for a correction.
Since the beginning of the year, speculative bullish bets on gold futures have surged significantly. The Commodity Futures Trading Commission’s (CFTC) disaggregated Commitments of Traders data shows that gold’s net length peaked at over 200,000 contracts at the end of January—the highest level in nearly three years. Since then, momentum traders have steadily liquidated their long positions, with selling pressure reaching a critical point.
Further selling pressure could push gold to key support at $2,800 per ounce. However, despite these short-term risks, the long-term uptrend remains firmly intact.
Beyond short-term speculative movements, investment demand for gold is picking up. Last week, data from the World Gold Council revealed that 48 tonnes of gold—valued at $4.6 billion—flowed into North America-listed gold-backed ETFs, marking the largest one-week surge since early April 2020.
Looking ahead, analysts expect Western investment demand to strengthen as economic uncertainty intensifies. In recent weeks, consumer sentiment has fallen to multi-year lows, while inflation fears have surged.
These concerns have been reinforced by disappointing economic data. On Friday, the Atlanta Federal Reserve’s Q1 GDP tracker showed the economy contracting by 1.5% this quarter, a sharp decline from last week’s 2.3% growth estimate—one of the steepest drops in the index’s history.
Analysts note that stagflation presents an ideal environment for gold, as it serves as a safe-haven hedge against economic uncertainty. Additionally, higher inflation will lower real yields, reducing the opportunity cost of holding gold as a non-yielding asset.
In another indicator of investor sentiment, analysts at BMO Capital Markets reported that gold and copper were the most discussed commodities at their exclusive mining conference. Interestingly, silver was a “distant third” in terms of interest.
Stay tuned to Kitco.com for continued coverage of the BMO mining conference and live updates from the Prospectors & Developers Association of Canada (PDAC) annual convention—the world’s largest mining conference.
While downside risks remain for gold, it is essential to focus on the long-term outlook.
That’s it for this week - have a great weekend!
