North American traders are waking up on Monday morning and gasping at another big rally in gold prices. The initial move in Asia was slightly lower but steady bids came in afterwards and accelerated to a record $3831 about 40 minutes ago before some profit taking.
The seeds were planted for the move last week. It was something I highlighted in an interview with Kitco News.
Adam Button, head of currency strategy atForexlive.cominvestingLive.com, said the price action itself is the real story.
“This week was a big test for gold,” Button said. “The data was all hot. It wasn't just [Friday’s PCE and consumer sentiment]. We had new home sales were hot. GDP was good. Durable goods orders were good. Then you had a massive wave of profit-taking that all came in a massive wave. You had profit taking in the Nasdaq and stocks in general. The dollar is up a little more than 1% this week.”
“The news flow ran entirely against gold this week, and yet it rallied anyway,” he said. “So the message from the gold market this week is that you don't need a softer U.S. dollar or big Fed cuts to sustain the gold rally. Yes, it's certainly good to have those things, but the gold market is rallying for so many reasons that removing any one of them at a time isn't enough to halt it.”
Button said gold bulls were holding their breath this week after several weeks in a row of strong gains. “Every other market started taking profits, and it would've been natural to see 3% drop, 5%, whatever in gold, but it's held up,” he said. “You can point to some of these things, like Comey and a few others, as drivers, and I'd agree. But on the pure economic side, it was a bad news week for gold. Yet they rallied.”
Button said that traders are looking at gold’s performance this week – especially with the dollar strengthening – and they can’t justify not buying.
“This will be six weeks in a row of gains,” he said. “Yes, gold is way out over its skis, it's overbought on the technical measures, but when the window opens for a correction, that just doesn't happen. Central banks aren't buying on the RSI.”
“Listen, as a gold bull, I'd love to see a $300 pullback – to buy,” he added. “But you don't want to be waiting for a $300 pullback, and watching it go to $4,000 or $5,000.”
The fact that the gold miners are really rallying now is also a clear signal to Button that retail is getting involved.
“I think it's a new chapter right now that's unfolding,” he said. “And I don't think it's the last chapter. It might be the back half of the book, but with retail getting involved, things get a lot more volatile, and we're probably in that kind of phase now.”
Button said anyone who’s been long technology stocks and precious metals in 2025 has done very well.
“That's such a barbell, you just go long tech, long gold,” he said. “And okay, a lot of great things are happening in tech, rah-rah, good luck to them, I hope it all works out. But if it all goes to [hell] or we end up in some dystopian future, I want to hold gold. You've just got a barbell strategy right there. That's the trade of the year.”
The risks are low to the gold rally at the moment with minimal economic data on the US calendar today. Pending home sales is out at 10 am ET but that's rarely a market mover. There is some Fed talk but Goolsbee, Bowman, Schmid and Daly have already spoken since the FOMC on the economy. Logan is speaking as well and previously touched on technical issues around the Fed funds target, rather than the outlook for monetary policy.
