Gold's November Pullback: Opportunity Knocks

Gold's remarkable record-breaking 2024 rally has hit a speed bump the last couple weeks. After surging as high as 35% to reach record highs as October came to an end, prices have pulled back 5% from nearly $2,800 per ounce to less than $2,600 per ounce.

Despite this correction, gold remains up 25% year-to-date.

What's Behind the Recent Gold Price Drop?

• Stronger US Dollar: The US dollar has climbed to its highest level since June (above 106 on the index). As the dollar goes up, gold tends to go down. When the dollar strengthens, it takes fewer dollars to buy gold, pushing gold prices lower.
• Rising US Treasury Yields: Treasury yields have jumped to their highest point since July. When these government bonds offer better returns, investors often move money from gold (which pays no interest) into bonds for guaranteed yields. The higher the yield, the more attractive bonds become compared to gold.
• Investor Optimism: Major gold investment funds (ETFs) sold about $809 million worth of gold (12 tonnes) in early November. This large-scale selling creates downward pressure on gold prices, similar to how a flood of sellers in any market drives prices lower.
• Gold ETF Outflows: Global gold ETFs experienced outflows of approximately $809 million (12 tonnes) in the first week of November.

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Silver Following Gold's Lead
Silver has followed gold's downward trend, falling to $30.19 - its lowest point since September. While near-term pressure could push prices toward $29/oz, silver's dual role as both a precious and industrial metal means it often experiences more dramatic price swings than gold.

Inflation Ticks Up
October's inflation rose unexpectedly to 2.6% from September's 2.4%, suggesting price pressures aren't fully contained. While the monthly rate held steady at 0.2%, this uptick could support precious metals prices, as gold traditionally serves as an inflation hedge.

Fed Holds Firm on Rates
Meanwhile Federal Reserve Chair Jerome Powell said in a speech last Thursday, “The economy is not sending any signals that we need to be in a hurry to lower rates.” Some finance professionals were counting on deeper rate cuts in coming Fed meetings, but inflation ticked up Wednesday and producer prices came in higher than expected this week.

Expert Outlook on Gold Remains Strong
Major financial institutions maintain bullish forecasts for gold:

• UBS: Targets $2,900/oz, recommending buying at current levels ($2,600)
• Bank of America: Predicts $3,000/oz by early 2025
• Citi Research: Projects $3,000/oz by mid-2025

The Big Picture

Let's put this pullback in perspective. At $2,600/oz, gold has merely returned to September levels - and remains up 26% in 2024. For long-term investors, market corrections like this should be viewed as times to load up on your favorite assets.

Remember: The fundamentals driving precious metals haven't changed. What has changed is the chance to acquire them at more attractive prices.

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Until next time,

Brandon S.  
Editor
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