Gold prices hit a new record high above $2,480 in Asian trades on Wednesday with expectations of further gains to $2,500 and beyond. The looming US Federal Reserve interest-rate cut in September has boosted the appeal of the non-interest-bearing gold price. Precious metal analysts believe that markets have fully priced in the upcoming rate cut in September and are now focusing on the possibility of another cut in December. Central banks worldwide continue to support the yellow metal, with the Central Bank of the United Arab Emirates reporting a 12 per cent increase in gold reserves by April 2024.
Vijay Valecha, CIO of Century Financial, attributed the surge in gold prices to increased investor confidence in a September rate cut. Factors such as Jerome Powell’s comments on inflation, geopolitical tensions, and central bank buying have all contributed to the upward momentum in gold prices. Valecha pointed out key support and resistance levels for gold price, indicating potential levels for traders to watch. Analysts note that the recent dovishness from Fed policymakers and a decline in the dollar have further supported the bullish momentum in gold prices.
Despite higher prices dampening demand, consumer interest in gold remains strong. ANZ analysts observed that consumer demand for gold stayed buoyant at 760 tonnes in 2023, only a marginal decline from the previous year. They attribute this resilience to higher capital gains and income growth, which have helped gold demand withstand elevated prices. Looking ahead, analysts expect gold prices to continue rising due to the dovish sentiment around the Fed’s interest rate outlook and potential stimulus measures from China to boost economic growth.
From a technical perspective, analysts predict that a sustained breakout above key resistance levels could trigger further gains in gold prices. However, they also note potential resistance levels near $2,500 that could pause the upward momentum. On the downside, a breach below key support levels could prompt some technical selling and lead to deeper losses. Overall, the outlook for gold prices remains positive, with upside risks intact and bullish sentiment prevailing in the market. Investors will be closely monitoring key levels and market developments to determine their trading strategies.
