- Gold and silver futures continued their record gains this week, supported by expectations of Federal Reserve policy and strong investor and retail demand.
- While precious metals prices gave up some of their overnight gains, gold and silver prices remained elevated.
- According to gold trading platforms, gold futures rose to $2450.80 an ounce, a new all-time record, before settling around $2420 an ounce at the time of writing.
- Overall, gold prices have risen by more than 17% since the beginning of 2024.
Silver prices, gold's sister commodity, also rose above $32 an ounce in trading. Overall, the white metal has been in a tear this year, being one of the best-performing assets, up 34% since the beginning of the year.
In general, market watchers have offered a variety of different opinions on why gold and silver prices are rising. The main assessment is that the Federal Reserve is expected to cut US interest rates in September, forcing traders to price in the cut. In addition, lower interest rates mean lower opportunity costs of holding non-yielding bullion.
US Treasury yields rose across the board on Monday, with the ten-year bond yield reaching 4.45%. According to the latest trading, the yield on 10-year US Treasury bonds ranged around 4.4% this week, which is higher than the lowest level in a month at 4.33% recorded last week, as traders re-evaluate their expectations for a reduction in US interest rates. Moreover, comments from several Fed officials were calling for US interest rates to be raised for a longer period. Also, Federal Reserve Governor Waller said on Tuesday that further rate increases are unnecessary, but that rate cuts are likely several months away.
On Monday, Atlanta Fed President Bostic said he believes “our new steady state is likely to be higher than what people have known over the past decade — perhaps back to where we were in the 1990s and 2000s.”
Despite continued expectations of a rate cut this year, investor confidence has waned slightly, with the probability of a September cut now at 61% and November at 73%, down from 64% and 77%, respectively, at the start of the week. Now, markets are awaiting the release of the minutes of the FOMC meeting on Wednesday for further clues on the Fed's monetary strategy.
The US dollar index (DXY), a measure of the dollar against a basket of other major currencies, did not affect metal commodities. The DXY dollar index rose to 104.53. A strong dollar is usually a bad thing for commodities priced in dollars because it makes them more expensive for foreign investors to buy.
Others say investors are watching fiscal policy as the federal government runs a budget deficit in times of recession and war. Thus, with interest payments the second-largest item in the budget, it has become difficult for the US government to keep up with interest charges, forcing it to issue more debt.
Electricity is another issue as silver and copper are huge components of electricity transmission and could play a major role in the transition to a green economy. Also, copper prices have risen this year, breaking above $5 due to a wide range of factors. Amidst this performance, analysts commented: "Global supply shortages, improving global economic growth, smelter issues in China, as well as rampant market speculation, including alleged 'short squeezes' in Comex copper futures at present, are all factors driving the price of the red industrial metal higher."
Overall, the breakthrough in the metals market has been amazing.
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Gold Price Forecast and Analysis Today:
Based on the performance on the daily chart the general trend for the price of gold remains strongly upward. Its recent gains have pushed all technical indicators to strong overbought levels, and profit-taking selloffs could occur at any time, especially if the US dollar recovers and global geopolitical tensions decrease. Until that happens, the overall trend for gold will remain upward, with the opportunity to test a new record high of $2500 per ounce. Ultimately, if the current factors driving its gains, such as increasing geopolitical tensions and central banks' gold purchases, continue.
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