Gold continued its upward trajectory on Monday, surpassing the $2,600 level on Friday for the first time in a rally driven by expectations of further U.S. interest rate reductions and escalating tensions in the Middle East.
The current price on Monday is slightly above $2,650 per ounce.
The recent surge in gold prices received a boost following the Federal Reserve’s aggressive easing measures last Wednesday, including a half-percentage-point rate cut, enhancing gold’s appeal as a non-interest-bearing asset. Gold prices have surged by 27% in 2024, marking its most significant annual increase since 2010, as investors have sought refuge amidst prolonged geopolitical uncertainties in the Middle East and other regions.
However, analysts caution that the unprecedented rally may face a correction soon. Daniel Ghali, a commodity strategist at TD Securities, highlighted that the Fed’s substantial rate cut has spurred buying activity, contributing to the upward momentum in gold prices.
The surge in gold prices has dampened retail demand in major markets like China and India. Commerzbank noted that while the rally may not be sustainable in the long term, expectations of modest 25-basis-point rate cuts at the Fed’s upcoming meetings could moderate the rally.
Despite expectations of a potential correction, some analysts believe that gold could experience intermittent spikes due to geopolitical risks, such as conflicts in Gaza, Ukraine, and other regions, bolstering the demand for gold as a safe haven asset. Additionally, the persistent weakness in the U.S. dollar, which makes gold more affordable for holders of other currencies, continues to provide support for gold prices, as noted by analysts.
