Gold’s Rally Continues Ahead of FOMC Minutes

Gold prices have been on a remarkable rally, recently reaching fresh all-time and historical highs. A confluence of technical indicators and fundamental factors suggests that this bullish trend may persist.

Technical Analysis: A Strong Foundation

The recent price action has been characterized by a series of higher highs and higher lows, a classic sign of an uptrend. Moreover, the breakout from a multi-month base has provided a strong foundation for further gains.
Rising ABCD Pattern: The formation of a rising ABCD pattern indicates a potential target of 2,543. This pattern, often used in technical analysis, suggests a continuation of the uptrend.

Symmetrical Triangle Breakout: The breakout from a symmetrical triangle consolidation pattern provides additional bullish momentum. The measured move from this pattern suggests a potential target of 2,605.
Fibonacci Extensions: Fibonacci extensions, a tool used to identify potential price targets based on mathematical ratios, indicate significant resistance levels at 2,566 and 2,661.

While technical analysis provides valuable insights, fundamental factors also play a crucial role in driving gold prices. Several factors are currently supporting the bullish outlook:

Geopolitical Tensions: The ongoing geopolitical landscape, characterized by uncertainties and conflicts, continues to drive safe-haven demand for gold.

Inflationary Pressures: Persistent inflationary pressures, coupled with central bank monetary policies aimed at curbing inflation, can increase the appeal of gold as a hedge against inflation.

Economic Uncertainty: Economic uncertainties, such as concerns about a potential recession or global economic slowdown, can also drive investors towards gold as a safe-haven asset.

Long-Term Outlook: Bright Future
The long-term outlook for gold remains positive. The recent price action and technical indicators suggest that the uptrend is likely to continue. While there may be short-term fluctuations, the underlying bullish momentum appears to be strong.

Gold prices have been on a strong uptrend, supported by both technical and fundamental factors. Technical analysis indicates potential targets based on rising ABCD patterns, symmetrical triangle breakouts, and Fibonacci extensions. Fundamental factors, such as geopolitical tensions, inflation, and economic uncertainty, continue to support the bullish outlook. The long-term outlook for gold remains positive, suggesting that the uptrend may persist.

As investors continue to monitor gold prices, it is essential to stay updated on both technical and fundamental developments. By understanding the underlying factors driving the market, investors can make informed decisions and potentially benefit from the ongoing bullish trend.

Gold prices have been on a tear, hitting a record high on Friday — and they could gain further. The precious metal has been boosted by a combination of factors, including active central bank buying, and has surged about 20% this year.

Prices have, in fact, been in an “uninterrupted rally” from a low of $1,810 an ounce in October. This means that a standard-size gold bar of about 400 troy ounces — like those featured in gold heist movies — now cost over $1 million each.

The spot gold price is just around $2,500s an ounce now, up about 21% so far this year. One big factor driving the market’s expectation for higher gold prices is a potential Federal Reserve interest rate cut, following slower-than-expected July inflation data and higher unemployment figures.

Investors will be scrutinizing Fed Chair Jerome Powell’s keynote at the central bank’s annual symposium at Jackson Hole, Wyoming, on Friday, for cues on what the central bank might do next. The question now is how big will the rate cut be?

If Powell does signal a larger rate cut — for example, a 50 basis point, or 0.5% percentage point, cut — it could feed into higher gold prices. A fall in US interest rates typically depresses bond yields and the greenback, in turn driving investment into gold, which is internationally denominated in the dollar.

Furthermore, a larger rate cut would “allude to greater concerns about economic recession by the central bank. A key reason central banks cut rates is because they want to stimulate lending and in turn, economic activity. As a time-tested store of value, gold prices would likely rise on fears of recession.

Geopolitical risks boost appetite for gold

Other than monetary policy, heightened geopolitical risks are also boosting the appeal of gold, a traditional safe haven. Risks include the wars in Ukraine, the Middle East, and the November US presidential election.

The US presidential election is a cause for concern because both candidates are “prepared to spend money they haven’t got, thereby lifting the US debt levels further,” Hansen added.

In China, consumers are also snapping up gold to preserve value amid a depressed economic environment, an epic property crisis, and a weak currency. Continued central bank demand amid geopolitical uncertainty and de-dollarization, and not least gold’s ability to offer a level of security and stability that other assets may not provide” would give support to the yellow metal.