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Gold Analysis: Bullish Breakouts Continue

As is known, the price of gold is sensitive to fluctuations in interest rates because it affects the opportunity cost of holding bullion that does not generate a return.

  • At the start of April trading, gold futures rose to their highest levels ever.
  • The yellow metal price was on edge with expectations that the Federal Reserve would cut US interest rates in June.

Gold Analysis Today 02/04 Bullish Breakouts Continue (graph)

But is there more behind the rise in the price of the yellow metal? This is what some of the gold bulls are emphasizing. According to gold trading platforms, the price of an ounce of gold rose to the resistance level of $2265, the highest in the history of the gold price, before stabilizing around $2253 an ounce at the time of writing the analysis. Overall, gold prices have gained 4% weekly and 8% in April. Since the beginning of 2024, the price of gold has risen by 9.5%.

In the same performance, silver prices, the sister commodity, recorded modest gains and silver futures jumped to $25.18 an ounce. Overall, the white metal price rose 1% last week and about 7% in March. Since the beginning of 2024, silver prices have risen by almost 5%.

What caused gold prices to rise to record levels without correction?

Market analysts say the biggest factor in the gold market is the expectation that the US central bank will cut interest rates in June. According to the CME FedWatch tool, the futures market expects a 70% chance of a rate cut in June. Despite expectations of lower interest rates, the US Treasury market rose across the board, with the 10-year yield rising 10.7 basis points to 4.303%. The two-year yield rose 5.6 basis points to 4.676%, while the 30-year yield rose 11.6 basis points to 4.453%.

As is known, the price of gold is sensitive to fluctuations in interest rates because it affects the opportunity cost of holding bullion that does not generate a return.

On Good Friday, the Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures Price Index, rose to 2.5% in February. The core personal consumption expenditures rate, which excludes volatile energy and food components, fell to 2.9%. At the same time, the metal's gains were limited by the strength of the US dollar, as the US dollar index (DXY), which measures the performance of the US currency against a basket of other major currencies, rose to 104.72 from an opening of 104.49. Also, the index has risen 3.3% since the beginning of 2024 to date. As is known, a strong dollar is usually bearish for dollar-denominated commodities because it makes them more expensive for foreign investors to buy.

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    As for the rise in the price of gold, some say there is something left under the surface that is fueling this bullish momentum. The game is over for the Fed, and bond yields and gold prices are both rising. Despite expectations of a rate cut by the Fed, long-term interest rates are rising anyway. This is because rate cuts will exacerbate the inflation problem.

    Peter Schiff, chief economist at Euro Pacific Asset Management, said: "This is bullish for gold but bearish for bonds."

    Gold Price Forecast and Analysis Today:

    The general trend of gold price remains bullish, considering that its recent gains were quite sufficient to move all technical indicators towards strong levels of saturation with purchase. Therefore, if the gains of the US dollar increase and expectations regarding an imminent US interest rate cut calm, gold prices may be exposed to strong selling to take profits. Moreover, if the factors of its current gains continue, the next historical psychological resistance of $2,300 per ounce may be within reach. Technically, the first break of the trend requires a move towards the psychological level of $2000 per ounce. Furthermore, the general trend for gold may remain bullish until markets and investors react to the announcement of US job numbers at the end of the week, which will have a strong reaction to the performance of the dollar and the future of the Federal Reserve’s policy.

    Ready to trade our Gold price forecast? We’ve made a list of the best Gold trading platforms worth trading with. 

    Mahmoud Abdallah
    About Mahmoud Abdallah
    Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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