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Is there anything that can stop the skyrocketing rise of gold?

Autor: Financial Market
Timp de citit: 2 minute

The price of gold witnessed a sudden increase, touching levels of $2350 to achieve its highest-ever level at $2354 in early trading today, Monday.

Despite easing geopolitical tensions in Gaza and reduced expectations of a rate cut by the US Federal Reserve in June, gold prices are likely to continue their record rise primarily due to reports of potential strong purchases of gold by global central banks.

It’s noteworthy that the price of gold dropped to nearly $2310 at the start of the day’s trading before rebounding.

Expectations that the Federal Reserve would eventually begin cutting interest rates in 2024, along with buying activity from the Chinese central bank, have been the main drivers of the precious metal’s rise over the past couple of weeks. However, overly exaggerated conditions on the daily chart may prevent prices from rising to new levels amid easing geopolitical tensions and positive risk sentiment, which tends to negatively pressure gold as a haven.

Additionally, optimistic monthly employment details in the United States released last Friday suggest that the Fed may postpone interest rate cuts, forcing investors to revise their expectations from three interest rate cuts in 2024 to two.

These expectations keep US Treasury bond yields high and act as a force for the dollar, which, in my view, further contributes to curbing the upward trend in gold prices that yield nothing. Investors may also prefer to tread cautiously ahead of the release of US consumer price inflation figures for March this week and the minutes of the Federal Open Market Committee meeting next Wednesday.

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In conclusion, I believe that purchasing power from the Chinese central bank, coupled with unclear US interest rate actions, has pushed the price of gold to a new record level on the first day of the new week.

I also believe that global risk sentiment received a strong boost after the Israeli occupation withdrew more troops from southern Gaza and committed to new talks on a potential ceasefire, easing geopolitical tensions in the Middle East. This will support the US dollar and limit the gains of commodities and gold in the medium term.

From my perspective, traders and investors are now looking forward to the release of US consumer inflation figures for March and the minutes of the Federal Open Market Committee meeting on Wednesday to obtain confirmed signals about the path of interest rate cuts by the Federal Reserve, which will determine the momentum of a new long-term trend, and perhaps this week will be a period of stability and fate-setting for the markets.

Article based on story from XS.com