Don't Panic about Pullback, Gold in Consolidation for Rally
Recently, gold $Gold - main 2412(GCmain)$ prices experienced a brief pullback after hitting record highs. However, traders and investors seem unphased, waiting for the next catalyst to push gold to new peaks.
Gold reached a historic high of $2,560.30 a few days ago, so the recent dip is just a minor fluctuation within its overall upward trend.
In early trading, December gold futures fell to a daily low of $2,504.40. Yet, market participants quickly seized this as a buying opportunity, and gold prices rebounded significantly in the afternoon, ending the day with only a slight drop of 0.15%. This minor retreat is largely due to a strong U.S. dollar, with the dollar index rising 0.13% to 101.776.
Gold’s strong performance this year is attributed to several factors, suggesting further gains in the coming months.
Goldman Sachs analysts recently highlighted gold as their top commodity pick for short-term gains, forecasting that gold prices will reach $2,700 per ounce by early 2025. Their reasoning includes:
Global central bank gold purchases have doubled since mid-2022.
Expected rate cuts by the Fed will attract Western capital back into gold, fueling its rise.
Gold provides crucial hedge value against geopolitical shocks.
UBS metals strategist Joni Teves also pointed out several key factors supporting gold’s rise: continued strong central bank buying, solid physical demand, high macroeconomic uncertainty, and persistent geopolitical risks.
In the first half of 2024, global central banks’ net gold purchases reached 483 tons, the highest on record. Latest data shows a net increase of 37 tons in official gold reserves in July.
The Fed’s policy shift also played a crucial role in gold’s recent performance. Predictions indicate a 100% chance of a rate cut in September, with a 63% probability of a 25 basis point cut and a 37% chance of a 50 basis point cut.
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