Gold rally with no end in sight
Gold rally with no end in sight
Gold continues its 5th-day consecutive rally to unprecedented heights. The yellow metal recently broke through the $2,700 mark and has reached well above $2,730 per ounce, culminating in a 31% rally year-to-date.
The driving forces behind this bullish trend are multifaceted. Heightened geopolitical instability, particularly in the Middle East, and the uncertainties surrounding the upcoming U.S. presidential election are fostering an environment ripe for investment in safe havens like gold. Analysts point to the tight race between former President Donald Trump and Vice President Kamala Harris as contributing to market apprehension, further driving demand for gold.
Technical indicators and market sentiment
From a technical standpoint, the momentum remains strong. The RSI has recently surged above the critical 70 level, and the stochastic oscillator indicates rising momentum in the overbought region. If this aggressive buying continues, gold may target key psychological levels of $2,800 and $2,900. However, a drop below the previous record high of $2,688 could see the price retreat towards the 20-day simple moving average around $2,650.
According to Vivek Dhar, Commbank's metals and mining expert, the forecast for gold futures looks promising, with the potential to reach $2,800 per ounce this quarter and $3,000 by the end of next year. He suggests that the backdrop of geopolitical uncertainty and the commencement of a rate-cutting cycle will continue to prop up gold prices, given its status as a non-yielding asset in a low-interest-rate environment.
Another factor that can contribute to gold's extended rally is the inverse relationship between gold and the US dollar. The potential for further reductions in the Fed Funds rate and the subsequent weakening of the US dollar are seen as key drivers for gold prices. Lower interest rates reduce the appeal of fixed-income assets, making gold a more attractive investment.
Read also: Gold rally stuns the markets amid overbought concerns.
