Talking Markets: Is Gold Getting Its Crowd Back?

Pull up a chair. The coffee’s hot, the screens are glowing, and somewhere between the headlines and the opening bell, the market has started whispering. Let’s listen.

Gold has started making a little noise again.

After gaining around 7% last week, gold jumped almost 4% on Wednesday alone , its biggest one-day surge since February, carrying the metal to a seven-week high.
Now, that gets my attention.

Not because the long-term gold investors suddenly discovered the buy button.

They’ve been there all along.

Central banks have continued buying, long-term investors have continued holding gold as insurance, and the usual gold faithful have been quietly doing what gold investors tend to do, waiting patiently while everyone else gets excited about something else.

The interesting question is whether the short-term crowd is coming back.

The crowd that left

Gold has had periods where it simply hasn’t been the most exciting trade in town.

And short-term money likes excitement.

It likes momentum. It likes a story. Ideally, it likes both before everyone else notices.

But a 7% weekly gain has a funny way of getting people’s attention.

Suddenly, investors who were perfectly happy sitting on the side-lines start asking whether they perhaps should have been sitting somewhere slightly closer to the pitch.
And that is where things get interesting.

It’s not about loving gold

The next move higher doesn’t necessarily require everyone to suddenly become a gold bug.

It may simply require investors to decide that not owning gold has become more uncomfortable than owning it.

Geopolitical uncertainty remains elevated. Central banks continue to accumulate. Investors are still navigating currency and inflation risks.

And when gold starts breaking higher at the same time, the temptation to get involved becomes rather difficult to ignore.

Markets have a habit of making people most interested in an asset immediately after it has gone up.

It’s almost as if they enjoy irony.

Could the crowd come back?

That’s the whisper I’m listening to this Monday.

The long-term money is already there.

The central banks are already there.

But if short-term investors start chasing the move, that could change the character of the gold market.

First comes the cautious money.

Then comes the momentum traders.

Then, inevitably, someone appears on television explaining why they’ve always been bullish on gold.

Usually about three weeks after the move started.

So, is gold getting its crowd back?

Perhaps.

And if it is, the important thing won’t be the investors who never left.

It will be the ones who suddenly realise they don’t own enough.

Because markets don’t always move when people change their minds.

Sometimes they move when people realise they have to.

Anyway, till next time, all of you trade safe. And remember- keep listening. Markets rarely shout before they move.

By James Trescothick
Head of Market Research and Market Analysis

Risk Disclaimer: This information is for educational purposes only and does not constitute investment advice. Financial markets involve risks, and past performance is not indicative of future results. Always conduct your own research and seek professional advice before making investment decisions.