A veteran advisor says that gold looks vulnerable after hitting a record high

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Gold prices on Monday extended their record-breaking run, notching another all-time high amid robust U.S. economic data and elevated geopolitical tensions.
Spot gold prices stood mixed to trade at $2,327 per ounce at around 1:45 p.m. London time, after briefly hitting a fresh record of $2,372.5 earlier in the session.
But not everyone is convinced gold prices will continue to rally.
“All of those factors actually suggest that upside in gold, frankly, is minimal and I think gold is now very vulnerable to a setback,” Parker said.
Fed officials have since raised the prospect of zero rate cuts if inflation remains sticky, and job creation in March comfortably topped expectations, potentially delaying the anticipated Fed rate cuts of this year.
Like Parker, Shing also highlighted the role of central bank demand in boosting gold prices.
Gold and silver prices have traditionally shown a strong positive correlation, although silver has sometimes been described as the “poorer cousin” of gold.
Analysts have previously told CNBC that silver appears well placed to outshine gold in the second half of the year.

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In the midst of a strong U.S. economy, gold prices continued their historic upward trend on Monday. s. increasing geopolitical tensions and economic data.

By 1:45 p.m., spot gold prices were trading at $2,327 per ounce, mixed. m. London time, having moments before set a new high of $2,372.5. In recent weeks, the yellow metal has reached numerous all-time highs.

The strength in the gold price is anticipated by some on Wall Street to last through the second half of the year at the latest. Citi has previously referred to the asset as a “recession hedge” for developed markets, and other analysts have suggested that additional support could come from the volatility caused by the ongoing wars in Gaza and Ukraine.

Not everyone, though, believes that the price of gold will keep rising.

Senior advisor Bob Parker of trade group International Capital Markets Association said on CNBC’s “Squawk Box Europe” on Monday, “I think there are two factors.”.

“The first factor is the catch-up effect, which is the fact that gold significantly underperformed when compared to global equity markets at the beginning of this year and last year. “.

Thus, the catch-up effect exists. Due to gold’s underperformance, investors are becoming more exposed to the metal. There is a correlation between bitcoin and gold, which is related to that. Whether or not that is significant is up for debate, but the fact remains that the two are related,” Parker stated.

“I believe there has been some central bank buying, especially from Asian central banks, increasing their asset allocation in their reserves to gold. This is the other factor, about which it is very difficult to obtain data. ****.

Despite high interest rates and a generally strong U.S. dollar, gold has rebounded, earning it the reputation of a “safe haven” asset during uncertain financial times. S. $1.

According to Parker, the gold market’s fundamentals seem to paint a bearish picture going forward, citing U. S. The dollar’s strength, growing bond yields, growing skepticism regarding the Federal Reserve’s intention to cut interest rates, and “reasonably” low inflation.

In fact, Parker stated, “all of those factors suggest that upside in gold is actually minimal and I think gold is very vulnerable to a setback.”.

A number of rate cuts this year have been anticipated, and market participants have been keenly observing remarks made by Fed officials on the subject.

According to predictions, the U.S. S. For the fifth straight meeting, the central bank last month maintained interest rates at their benchmark 5 percent to 5 percent overnight borrowing rate. Additionally, the Fed indicated that it continues to anticipate three quarter-percentage-point reductions by the end of 2024.

Since then, Fed officials have hinted that they may consider cutting rates to zero if inflation stays persistent. Additionally, job growth in March easily exceeded forecasts, which could postpone this year’s planned rate cuts.

Edmund Shing, chief investment officer of BNP Paribas Wealth Management, said on CNBC’s “Street Signs Europe” on Monday, “We have been very bullish on precious metals for a while so obviously that’s great but even we are a little bit puzzled as to the strength of gold.”.

The interesting thing about gold, and what I believe to be very positive for the medium term, is that its momentum has totally broken away from its historical relationship with real interest rates and the U.S. S. dollar. “.

Investors who are “looking much further ahead” to concerns like debt sustainability, according to Shing, appear to be giving gold a little push. Similar to Parker, Shing emphasized how central banks’ purchases of gold contribute to their rising value.

Remember that central banks all over the world—especially those in China, India, and emerging markets—have been gradually amassing gold, Shing remarked.

Perhaps even more intriguing at this moment is the response we’re witnessing in other precious metals, most notably silver, which is at last beginning to catch up. Yet even from its all-time high of $50 per ounce, set back in 2011, it is still very, very far from that,” he continued.

Though silver has occasionally been referred to as gold’s “poorer cousin,” gold and silver prices have historically demonstrated a strong positive correlation.

In the second half of the year, analysts have told CNBC that silver seems to be in a strong position to surpass gold.

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