Gold’s close above $1,200 an ounce may mean a lot more than you think.
Future prices for the metal rallied Thursday, with the August contract GCQ5, -0.28% surging $25.20, or 2.1%, to settle at $1,202 an ounce on Comex, the highest close for a most-active contract since May 22.
To be sure, the rally was impressive. It was the largest single-session point and percentage gain in about five weeks. But the fact that prices have rallied above $1,200 is a milestone in its own right.
US:GCQ5
$1,150$1,200$1,250$1,300$1,100$1,350
Earlier this month, futures prices touched lows near $1,170, though dipped close to $1,150 in March at their worst this year.
Due to the “DNA of its volatility,” it would be normal for gold to move plus or minus 15% from its lows, said Holmes, who didn’t say that prices have hit a bottom.
Still, he leaned more toward the plus side for gold, saying it would be reasonable to see the metal end the year around $1,350 an ounce.
The second half of the year tends to see events that have a bigger impact on the consumption of gold in the form of gift-giving, such as the holy festival of Ramadan, the wedding season in India and Christmas, said Holmes.
The $1,200 level also marks a “sweet spot” for gold producers in terms of production costs, he said.
The industry has often viewed that price as a threshold for profitability in the gold-mining industry and suggested that prices below that level could slow production growth.
Looking a bit further ahead, Holmes said the big surprise for the gold market this year could come from China.
“China is positioning itself to be the price maker for gold,” said Holmes. “The physical market has moved to Shanghai and to attract the banks, [China] has created a tax-free financial zone.”
