This week, gold prices surged to a record high, with markets focused on next week’s Federal Reserve policy decision. Expectations of a rate cut have fueled demand for safe-haven assets.
Gold Hits Record High as Market Sentiment Rises
This week, the gold market experienced a strong upward trend, with spot gold prices reaching a record high of $2,586.09 per ounce and closing at $2,578.36 on Friday. The $80 increase marks the best weekly performance since 2020. Investors anticipate a significant rate cut from the Federal Reserve in its September 18 meeting. Combined with global central banks adopting looser monetary policies, this expectation has driven investors toward safe-haven assets, boosting gold’s price.
Geopolitical tensions have further amplified the demand for safe assets. The ongoing Russia-Ukraine conflict and tensions in the Middle East have turned gold into a financial safe harbor. As global economic growth slows and inflation subsides, gold’s role as a store of value becomes increasingly important.
Easing Expectations Drive Gold Prices
One of the main factors behind this week’s gold rally is the growing expectation of a Federal Reserve rate cut. With central banks worldwide lowering rates, the market now expects the Fed to adopt even more aggressive easing measures. The CME’s FedWatch tool shows the probability of a 50-basis point rate cut next week has jumped from 20% last week to over 45%.
The European Central Bank’s 25-basis point cut on Thursday reinforced these easing expectations, prompting investors to increase their gold holdings. Market data also shows a sharp rise in the open interest of Comex gold futures, indicating that more investors are establishing new long positions.
Technical Analysis: Bullish Trend Intact
From a technical perspective, gold has broken through several key resistance levels, particularly with its move to new record highs. Analysts generally believe that gold has room for further gains in the short term, with the next target potentially being the $2,600 per ounce mark. FXStreet analysts note that if the Fed cuts rates by 50 basis points as expected, gold could see more upside. Technical indicators, such as the Relative Strength Index (RSI), remain in normal ranges, suggesting that gold has not yet entered overbought territory and still has upward potential.
Central Banks and ETF Demand Support Long-Term Growth
According to the World Gold Council, holdings in gold ETFs have increased for three consecutive months, signaling renewed interest from Western investors. Additionally, central banks around the world continue to boost their gold reserves, providing further support for prices. Analysts at Citi project that gold prices could rise to $2,600 per ounce by the end of 2024, with the potential to reach $3,000 per ounce by 2025, driven by central bank easing and growing physical demand.
Federal Reserve Policy Becomes the Market’s Focus
As the Federal Reserve meeting approaches, the market’s focus on the central bank’s rate decision has intensified. TD Securities analysts point out that while the market widely expects a 25-basis point cut, a 50-basis point cut could lead to even more gains for gold. However, if the Fed’s easing measures fall short of expectations, gold could face a short-term pullback.
Despite uncertainty surrounding the global economy and ongoing geopolitical risks, gold remains supported by several long-term factors. Analysts believe that the upcoming U.S. presidential election and further easing by other major central banks will continue to drive demand for gold as a hedge against immediate risks.
Gold’s Bullish Trend Remains Strong
In summary, gold prices surged this week due to a combination of easing monetary policies and rising demand for safe-haven assets, hitting record highs. As the Federal Reserve decision looms, the market will closely monitor the rate cut and its impact on gold prices. While short-term fluctuations are possible, the long-term bullish trend in gold remains intact, driven by global economic slowdown and increased uncertainty.
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