The outlook for gold remains optimistic, with prices hitting new highs.
On Friday, September 20, during the European session, gold prices hit a new high after breaking through the $2600 mark. Some profit-taking is expected in the near future, but I remain mildly bullish on gold for the remainder of the year. Gold may not reach the $3000 milestone this year, but that level remains my long-term target for gold, driven by investor expectations of accelerated rate cuts by major central banks such as the Federal Reserve, as well as continued geopolitical tensions and factors such as central bank gold purchases creating a positive environment for gold prices.
Time:
2024-09-21 09:39
On Friday, September 20th, during the European trading session, gold prices hit a new high after breaking through the $2600 mark. Some profit-taking is expected in the near future, but I remain mildly bullish on gold's outlook for the remainder of the year. A $3000 milestone may be out of reach this year, but that level is my long-term target for gold, driven by investor expectations of accelerated rate cuts by major central banks like the Federal Reserve, along with continued geopolitical tensions and factors such as central bank gold purchases creating a positive phase for gold prices.
Interest Rate Cuts and Their Impact on Gold's Outlook
As mentioned earlier, one of the main drivers for gold prices is the potential for the Federal Reserve to accelerate interest rate cuts in early 2025. Inflation has been moving closer to the Fed's target, while the unemployment rate is rising, prompting the Fed to cut rates by 50 basis points this week. The market currently anticipates approximately 100 basis points of rate cuts this year and another 100 basis points next year, but the cuts could be even larger if the economic situation deteriorates faster than expected, thereby depressing bond yields and further boosting gold's appeal. However, the opposite is also true: a surprisingly strong US economy and labor market next year, coupled with the prospect of inflation remaining high, would prevent the Fed from cutting rates significantly.
Central Bank Purchases May Slow
Meanwhile, central bank purchases have also supported the bullish gold outlook. Despite gold being at record highs, gold purchases by central banks such as the People's Bank of China have remained strong. However, this source of demand could weaken if global inflationary pressures ease further, reducing the desire to diversify reserves away from fiat currencies. That said, central banks may hoard gold reserves rather than divesting them from their balance sheets.
Significant Geopolitical Risks
Geopolitical risks, such as the ongoing conflicts in Gaza, Ukraine, and other regions, will ensure that the safe-haven demand for gold is maintained. Furthermore, the upcoming US election could impact gold prices, although in a more subtle way. Kamala Harris is likely to win with a divided Congress, which is the current situation. One can expect to see a more stable political landscape than under Trump's presidency. However, a Harris win could weaken the dollar, indirectly benefiting gold.
Gold Outlook: Technical Analysis and Levels to Watch
Technically, the gold chart remains in a strong uptrend, with investors concerned about how much higher gold will go. But it's important to watch for profit-taking and short-term reversal signals, as momentum indicators like the RSI are pointing to overbought conditions, especially on longer-term weekly and monthly timeframes. With gold at record levels, the next obvious target is the $2700 mark, having now broken through $2600. Key support levels include $2600, followed by $2530, and finally $2500.
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Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.