- The strong breakout in gold prices in recent months has been noticeable. But the reason is not its rapid vertical rise to impressive record highs.
- This breakout is exceptional because it is not being fueled by the usual gold drivers. High demand outside of normal channels is pushing gold into uncharted territory, a truly bullish development.
- Thus, this keeps buying power strong from speculators and regular gold investors.
- Amidst an environment of heightened geopolitical tensions and record gold purchases by central banks, gold prices broke through a historic record level of $2,400 an ounce with gains extending to $2,432 an ounce before settling around $2,390 an ounce.
Every major rise in gold prices over the past two decades has been driven by a combination of three successive phases of buying from specific groups of traders. The first are speculators covering gold futures contracts, the second are speculators buying gold futures contracts, and the third are investors returning to chase the resulting upward momentum in gold as evidenced by gold ETF holdings. Furthermore, this model doesn't fully explain the current situation!
Will Gold Prices Fall in the Near Future?
Gold prices remain stable near record highs as heightened geopolitical risks continue to provide support even as the Federal Reserve signals a possible delay in US rate cuts. Recently, gold prices shrugged off US Fed Chairman Powell's reluctance to provide any guidance on when the Fed might start cutting rates, saying instead that monetary policy should remain restrictive for longer.
Consequently, his comments caused Treasury yields and the US dollar to rise, triggering another collapse in market expectations of a US rate cut this year. Traditionally, this would be negative for non-yielding gold, but the metal remains in an upward trend that has surprised some observers. Commenting on gold market performance, Lukman Otunuga, senior research analyst at FXTM, said: "The precious metal is witnessing an area of extreme overbought from a technical perspective... but bulls are drawing strength from the pervading uncertainty in the markets as geopolitical factors overshadow data and monetary policy expectations."
According to gold trading platforms, bullion prices have gained around 16% so far this year and over $500 since October 7th, with the conflict in the Middle East being the turning point.
In a note to Reuters, the analyst noted that while gold prices have largely remained uncorrelated with the US dollar and Treasury yields in the current trend, they may still show short-term responses to moves in both. Also, long-term support for higher gold prices is coming from strong buying by central banks and increased demand from Chinese consumers. With these unconventional factors supporting gold, Goldman Sachs raised its gold price forecast to $2,700 an ounce, pointing to the metal's stability after the latest US inflation data.
Gold Price Forecast and Analysis Today:
The price of gold has now risen to trade a few levels above the 100-hour moving average line. As a result, the gold price appears to be moving near the overbought levels of the RSI on the 14-hour frame. In the near term, and according to the performance on the hourly chart, it appears that the price of gold is trading within an ascending channel. Also, the 14-hour RSI appears to be supporting a short-term uptrend as it approaches overbought conditions. Therefore, the bulls will target extended gains at around $2,408 or higher at the $2,425 resistance per ounce. On the other hand, the bears will be looking for a pullback at around $2,383 or lower at the $2,370 support.
In the long term, and according to the performance on the daily chart, it appears that the price of gold is trading within an ascending channel. Moreover, the 14-day RSI appears to support a long-term bullish bias after rising to overbought levels. Therefore, the bulls will target long-term gains at around $2,445 or higher at the $2,501 resistance per ounce. On the other hand, the bears will target longer-term pullbacks at around $2,344 or lower at the $2,200 per ounce support.
Ready to trade our Gold Analysis? We’ve shortlisted the most trusted Gold brokers in the industry for you.