Gold prices are up more than 22% this year

Callum Thomas, founder of Topdown Charts, highlighted the importance of gold's breakout rally this year, following a prolonged period of consolidation. Gold prices have surged by over 22% this year, with December gold futures recently trading at $2,543.80 per ounce.

"We are clearly in a new upward trend, and the factors fueling this movement are unlikely to disappear anytime soon," he noted.

Gold’s breakout this year is tremendous

Gold has seen rising interest in 2024 as the yellow metal surged to new record highs amid a backdrop of sticky inflation and concerns about a recession, highlighting the precious metal's safe-haven status.

Over the summer, gold benefited from declining bond yields and a weakening U.S. dollar. Last month, the U.S. dollar index dropped to a one-year low, testing support around the 100-point mark. Callum Thomas pointed out that the selloff pushed the index below a key trendline.

“Despite the growing interest in newer asset types like cryptocurrencies, gold’s reputation as a stable and secure asset continues to resonate with a sizable portion of the population, particularly in certain parts of the U.S.,” Chastain said. “While the same Gallup poll indicates that gold’s reputation as a reliable asset varies by income and political affiliation, interest in gold also varies regionally.”

While the U.S. dollar has since rebounded from its recent lows, Thomas believes that overall weakness in the currency will continue to support gold prices.

"Even though the dollar's resilience and higher real yields didn't halt gold's rise, I think a weaker dollar and lower yields will act as tailwinds—especially since they reflect some of the core factors driving gold higher," he said.

Analysts’ concerns about the gold market

Some analysts have expressed concerns about speculative positioning in the gold market, as bullish bets are at a four-year high. There's a risk that these speculators could liquidate their long positions, potentially pushing prices lower.

Despite this elevated positioning, Thomas noted that interest in gold remains relatively low. He pointed out that retail investors have not yet significantly entered the market, as seen in the limited demand for gold ETFs.

Thomas suggested it may only be a matter of time before broader investors begin to take notice of the precious metal again.

"Offshore buyers, such as central banks, have been a key driver, but as other market trends, like the hype around AI, begin to lose steam, investors may start looking toward areas showing relative strength, such as gold," he said. "The rotation theme isn't over yet. What we saw in July, with shifts from big tech to small caps, is likely just the beginning and could unfold in ways that people aren’t anticipating."

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