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Gold prices wrapped up their third straight quarterly gain Friday after a key U.S. inflation gauge favored by the Federal Reserve was broadly in line with expectations, maintaining hopes that the central bank could cut interest rates by September.
The U.S. Department of Commerce said its core Personal Consumption Expenditures Price Index, which strips out volatile food and energy prices, rose 0.1% in May, compared to April's revised 0.3% increase, and core PCE rose 2.6% in the last 12 months, down from 2.8% reported in April.
"We are continuing on trend in a very incremental slow pullback of inflation," David Meger of High Ridge Futures told Reuters. "As a result, we've seen yields continue to creep lower, bonds creep higher and that is somewhat supportive for the gold market."
Front-month Comex gold (XAUUSD:CUR) for July delivery ended the quarter at $2,327.70/oz, +4.9% for the quarter but just 0.2% higher for June and 0.1% on Friday.
Front-month Comex July silver (XAGUSD:CUR) ended the current quarter at $29.237/oz, +17.9% for the quarter but down 3.5% in June; on Friday, silver added 1.1%.
Gold and silver both touched YTD settlement highs on May 20 of $2,433.90/oz and $32.205/oz, respectively; gold and silver are up 12.8% and 22.5% YTD, respectively.
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$3,000 gold within the next year is "not crazy" in the current economic and geopolitical environment, and the implications on mining stocks are profound, John Hathaway, Senior Portfolio Manager of Sprott Asset Management, told Kitco.
Hathaway said mining stocks are lagging in a top-heavy equity market that is highly concentrated in a handful of tech stocks.
Investors are "positioned in a very few stocks that explain the movement of the S&P, and it's a very crowded trade," Hathaway said, according to Kitco. "I think if that crowded trade starts to unwind, people will look around and say 'well, what else is there?' And they will discover the opportunities in precious metals mining stocks."
"There's a huge mean reversion trade ahead of us, assuming gold prices stay at these levels," Hathway said. "And then I could make an argument for why they could move even higher, if and when people lose their degree of comfort and complacency with how they're currently positioned. I think that lies ahead, and that's why I would say we are at the cusp of a big move in mining stocks even if the gold price stays where it is."
