Key points:
Gold prices surged to new record highs on Monday as a weakening dollar and mounting expectations for a large interest rate cut by the U.S. Federal Reserve drove market demand.
SEE: Gold sees sustained upswing on the VT Markets app.
We turn our attention to the charts. In the XAUUSD chart, gold has continued its bullish run, closing at $2,585.01. The price surged after opening at $2,579.65, reflecting a trend driven by what our analysts believe include, the softer U.S. dollar and changing expectations for U.S. interest rate cuts.
We see also that the MACD (12,26,9) has crossed into bullish territory, further confirming upward momentum in recent sessions.
Technically, gold has been supported by the 50-day and 30-day moving averages, with no signs of immediate bearish pressure. A break above $2,600 could extend the rally further, while any disappointing economic data from the U.S. might fuel additional gains in the near term.
Most notably, UBS has labelled gold its “Most Preferred” asset in global allocation, highlighting the metal’s 23% price jump this year.
“We see gold prices rising to USD 2,600/oz by the end of 2024 amid firm demand from central banks and a likely rise in activity from exchange traded funds.” — UBS, 19 Aug 2024
The surge in prices reflects a combination of falling U.S. bond yields and central banks’ moves to diversify away from the U.S. dollar.
Several macroeconomic factors have reinforced gold’s bullish momentum. Key among these is the European Central Bank’s (ECB) rate cuts, which have reduced returns on euro-denominated assets, pushing investors toward gold.
See also: Gold inches higher as investors eye US data for rate cues
Additionally, August marked the fourth consecutive month of inflows into physically-backed gold ETFs, indicating sustained interest from institutional investors.
However, trimmed expectations for the scale of potential U.S. Federal Reserve cuts have somewhat offset the ECB’s easing. The market now expects a 59% chance of a 50-basis-point (bp) reduction by the Fed this week, according to the CME FedWatch tool.
This would mark the first rate cut since 2020 and could further weaken the dollar, making gold even more attractive to international buyers.
Looking at other precious metals, Silver also experienced gains, with prices rising 0.6% to $30.85 per ounce, reaching a two-month high. Platinum dropped 0.7% to $988.46, while palladium saw a modest uptick of 0.2%, trading at $1,070.25.
As geopolitical risks remain heightened and global interest rates are expected to stay lower for longer, demand for precious metals, especially gold, could see sustained support in the coming months.
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