Big market coming! Gold may break through the $2300 mark in 2024. Beware of the "biggest risk event" next week.
Gold prices hit record highs this week, rising for eight consecutive days, boosted by a mixed US jobs report and expectations that the Federal Reserve will cut interest rates by mid-year. Furthermore, the People's Bank of China's continued rapid gold purchases also provided support for gold prices. Looking ahead to next week, the biggest event risk for gold is the US February Consumer Price Index (CPI) report; if inflation is higher than expected, it could put some selling pressure on precious metals. This week's most notable report was the US non-farm payroll data. While the data showed strong job growth in February, the unemployment rate rose to 3.9%, and wage growth slowed, suggesting that inflationary pressures may be easing. This, including significant negative revisions to past employment reports and wage data, fueled expectations of a more accommodative monetary policy from the Federal Reserve. Gold prices have risen sharply this year, driven by expectations of lower interest rates, reflecting the appeal of gold as a non-yielding asset compared to yield-bearing investments such as bonds. Gold is currently overbought in the short term, but long-term returns suggest there is further upside potential. The People's Bank of China has increased its gold reserves for 16 consecutive months. The People's Bank of China's gold reserves increased by 390,000 ounces in February, marking the 16th consecutive month of increases. According to data released by the central bank on Thursday, March 7, China's gold reserves totaled 72.58 million ounces at the end of February, up from 72.19 million ounces at the end of January. Since November 2022, the People's Bank of China has been increasing its gold reserves for 16 consecutive months. The continued buying spree by China and other central banks has been crucial in supporting the recent surge in gold prices to record highs. In addition, geopolitical tensions and uncertainty in areas such as the Middle East and Ukraine continue to support gold's position as a safe-haven asset. Furthermore, a weaker US dollar, partly due to expectations of Federal Reserve policy adjustments, has made gold cheaper for overseas buyers, further boosting prices. Market dynamics show that investment funds and traders are increasingly betting on gold as a hedge against potential economic instability and inflation. It is worth noting that short-term consolidation may occur as the market digests the Fed's statements and the impact of the employment data. Overall, the outlook for gold remains generally bullish, driven by a combination of factors including expected interest rate cuts, a weaker US dollar, and continued demand as a safe-haven asset. Naeem Aslam, chief investment officer at Zaye Capital Markets, said the data confirmed the need for the Fed to act, and traders have increased their short positions on the US dollar index, which is positive for gold prices. He believes that setting a gold price target of $2300 per ounce by the end of the year looks more likely to be achieved. Nicky Shiels, head of metal strategy at MKS PAMP, noted that while gold benefits from the potential for Fed rate cuts, the rally lacks a specific catalyst, which may suggest that gold prices will continue to rise. He believes that unknown factors in the market are more important than known fund flows. From a technical perspective, gold's rise started from a higher base, and its seven-day upward trajectory is similar to past price peaks. Although the known fund inflows observed over the past week were mainly sales (ETFs, some physical and producer sales), this still cannot match the unknown buying volume. Looking ahead to next week, the market will focus on data including US CPI, PPI, and retail sales data, as well as UK employment reports and GDP data, to see whether they will cause a recent pullback in gold prices or whether the price will continue to rise from here. Gold prices clearly broke through the long-term resistance area below 2100 this week, extending the upward momentum to eight days. From a long-term perspective, it is difficult to say that gold prices are overheated, so any pullback is likely to be relatively limited. For the rest of this week and month, as long as gold prices remain above $2075, "buy the dip" trades will continue, with almost no potential resistance before approaching $2300.
Time:
2024-03-10 09:37
FX168 Financial News (Hong Kong) reported that gold prices rose for eight consecutive days to record highs this week, boosted by a mixed US jobs report and expectations that the Federal Reserve will cut interest rates by mid-year. In addition, the People's Bank of China's continued rapid increase in gold holdings also provided support for gold prices. Looking ahead to next week, the biggest event risk for gold is the US February Consumer Price Index (CPI) report; if inflation is higher than expected, it could put some selling pressure on precious metals.
The most noteworthy report this week was the US non-farm payroll data.
Although the data showed strong job growth in February, the unemployment rate rose to 3.9%, and wage growth slowed, suggesting that inflationary pressures may have eased. Factors including significant negative revisions to past employment reports and wage data intensified expectations that the Federal Reserve may adopt a more accommodative monetary policy.
Driven by expectations of lower interest rates, gold prices have risen sharply this year, reflecting the attractiveness of gold as a non-yielding asset compared to yield-bearing investments such as bonds.
Gold is currently overbought in the short term, but long-term returns suggest there is still room for further price increases.
The People's Bank of China has increased its gold reserves for 16 consecutive months.
The People's Bank of China's gold reserves increased by 390,000 ounces month-on-month in February, marking the 16th consecutive month of increases.
According to data released by the People's Bank of China on Thursday (March 7), China's gold reserves at the end of February were 72.58 million ounces, compared to 72.19 million ounces at the end of January. Since November 2022, the People's Bank of China has begun this round of gold reserve increases, achieving 16 consecutive months of increases by February.
The continued buying spree by China and other central banks has been crucial in supporting the recent surge in gold prices to record highs.
In addition, geopolitical tensions and uncertainty in the Middle East and Ukraine continue to support gold's position as a safe-haven asset.
Furthermore, a weaker US dollar, partly due to expectations of Federal Reserve policy adjustments, has made gold cheaper for overseas buyers, further pushing up prices.
Market dynamics show that investment funds and traders are increasingly betting on gold as a hedge against potential economic instability and inflation.
It is worth noting that short-term consolidation may occur as the market digests the impact of the Federal Reserve's statements and employment data.
Overall, the outlook for gold remains generally bullish, driven by a combination of factors including expected interest rate cuts, a weaker US dollar, and continued demand as a safe-haven asset.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said that the data confirmed the need for the Federal Reserve to act, and traders have increased their short positions on the US dollar index, which is positive for gold prices. He believes that setting a gold price target of $2300 per ounce by the end of the year looks more likely to be achieved.
Nicky Shiels, Head of Metal Strategy at MKS PAMP, pointed out that although gold prices benefited from the potential for Federal Reserve rate cuts, this rally lacked a specific catalyst, which may indicate that gold prices will continue to rise.
He believes that unknown factors in the market are more important than known capital flows. From a technical perspective, gold's rise started from a higher base, and its seven-day upward trajectory is similar to past price peaks.
Although the known capital inflows observed over the past week were mainly sales (ETFs, some physical and producer sales), this still cannot match the unknown buying volume.
Looking ahead to next week, the market will focus on data including US CPI, PPI, and retail sales data, as well as UK employment reports and GDP data, to see whether it will prompt a recent correction in gold prices or whether it will continue to rise from here.
Gold prices clearly broke through the long-term resistance area below 2100 points this week, extending the upward momentum to eight days.
From a long-term perspective, it is difficult to say that gold prices are overheated, so any correction is likely to be relatively limited.
For the rest of this week and month, as long as gold prices remain above $2075, "buy the dip" trades will continue, with almost no potential resistance before approaching $2300.
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