Commodities Corner: Why gold still has a shot to reach a record high this year

by | May 26, 2023 | Stock Market

Investors tried and failed earlier this month to lift gold prices to a fresh record high and even the risk of a U.S. debt default has been unable to keep prices for the precious metal above the key $2,000 level. Gold, however, still has a good chance to reach an all-time high before the year is done.

The market uncertainty brought about by the wrangling in Congress over raising the U.S. debt ceiling, mentions of a potential technical default as soon as June 1, and even a warning of a potential U.S. credit rating downgrade by Fitch, “while clearly gold positive, failed to become a true catalyst for gold prices from these levels,” said Imaru Casanova, portfolio manager, gold and precious metals, at VanEck. “The market expects a deal to be reached” on the debt ceiling. Read: Here are 3 key things to know about markets and the debt-ceiling fight as Memorial Day weekend approaches Gold futures


made a run toward fresh record highs in early May, settling as high as $2,055.70 an ounce on May 4, the second highest on record and highest for a most-active contract since Aug. 6, 2020 when when prices finished at a record high of $2,069.40, according to Dow Jones Market Data. Prices have settled below the key $2,000 mark for the nine consecutive sessions as of Friday. The precious metal has actually been “flirting” with the $2,000 level for over a decade now, said George Milling-Stanley, chief gold strategist at State Street Global Advisors. It started in 2011, “the last time political wrangling over the debt ceiling was a significant issue,” with prices coming close to $2,000 in September of that year, he told MarketWatch. Gold surpassed that key level in 2020 and again earlier this year. Read Gold at $2,000: Why it took so long for the precious metal to solidly breach that key level Given that gold prices have been flirting with a new high above $2,000 for more than a decade, the belief that any price above that key level was the right level to take profits “became firmly entrenched in the minds of investors and speculators,” said Milling-Stanley, offering a long-term reason why gold has so far failed to reach a new record high. Short term, gold hasn’t successfully reached a fresh high because the markets “suddenly came to the conclusion that there would be a favorable outcome to the debt-ceiling debate and the U.S. would not default on its debt.” Even so, Milling-Stanley believes the “economic and political situation, coupled with some favorable developments in gold demand seem likely to propel prices back above that level” this year. Read: Why gold prices hitting a record-h …

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