At the beginning of this week's trading, the gold price XAU/USD attempted to rebound higher, but its gains did not exceed the $2046 per ounce level. With the continued gains of the U.S. dollar influenced positively by American job figures at the end of last week, gold selling resumed with losses reaching the $2016 per ounce support level before stabilizing around $2028 per ounce at the time of writing this analysis.
Will Gold Prices Fall in the Coming Days?
The gold market is gearing up to make history in 2024. It enters the new year a remarkable distance from its all-time highs. But how high will gold prices rise? The answer... depends largely on how much interest rates and the U.S. dollar price fall. The Federal Reserve ended its campaign to raise U.S. interest rates last fall. It is expected to move towards monetary easing later this year. This should work in favor of gold XAU/USD and other hard assets.
Naturally, there is still a great deal of uncertainty surrounding the economy, inflation, and interest rates. If ongoing inflationary pressures force central bank governors to keep interest rates high, then stock and bond markets could collapse – and possibly the precious metals markets with them, at least temporarily. Market volatility could also increase later in the year around the presidential elections. With prosecutors and partisan judges threatening to imprison President Joe Biden's main rival and some state election officials moving to remove former President Donald Trump from the ballot, questions have already been raised about the legitimacy of the elections.
Some critics warn that something resembling a civil war could break out if the declared winner of the elections is found to have stolen them. Regardless of the outcome, larger questions loom about the American political system's ability to handle the escalating debt crisis. Neither Republicans nor Democrats in power have any realistic plans to control spending, balance the budget, or repay debts.
The government will cost over a trillion dollars in 2024 just to pay interest payments on the debt. With the national debt surpassing the $34 trillion-mark, social security and healthcare are rapidly heading towards insolvency and represent trillions more in unfunded liabilities. It is impossible to raise taxes enough to cover these massive obligations. The political reality is that spending will never be cut, and promised benefits will never be withdrawn.
Another turning point is approaching. The U.S. government's credit rating was downgraded twice by rating agencies in 2023. However, under the mandatory monetary system, the Treasury can always "borrow" more dollars into existence by dumping bonds onto the Federal Reserve's balance sheet in exchange for cash created from nothing. Inflating the currency supply is how the government will continue to pay its bills. The way to maintain purchasing power amid significant currency devaluation is to hold gold and silver.
Unlike Federal Reserve paper notes, precious metals are scarce. In fact, they are facing an increasing supply deficit in 2024. Major gold, silver, copper, platinum, and palladium mines are suffering from rising operating costs and deteriorating reserves.
As mining production reaches its peak, demand for metals among industries, consumers, and investors continues to grow. The demand for investment is the wild card for the gold and silver markets. It increased after the outbreak of COVID-19 but declined in 2023 as higher interest rates attracted savers to money market funds and rising stock markets reduced the attractiveness of bullion as a haven. But this could change in 2024. The prospect of lowering U.S. interest rates by the Federal Reserve, uncertainty about the elections, and the mounting debt storm make holding physical precious metals mandatory for those seeking to protect their wealth.
Today's Gold Price Forecast:
Despite the recent selling operations, as mentioned before, the gold price XAU/USD remains on an upward trajectory on the daily timeframe chart above. As I mentioned before, gold will not abandon its current bullish outlook without moving towards the $2000 and $1985 support levels, respectively. As I mentioned before, selling operations remain opportunities to consider buying gold again. Global geopolitical tensions and increased central bank gold purchases support prices to move higher for a period. Conversely, on the same timeframe, the nearest resistance levels for gold will be $2055 and $2070 per ounce, respectively.
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