Gold Price Analysis: Heading to Record New Highs – 16 September 2024

-- At the beginning of this week, the price of gold rose to around $2590 per ounce, setting a new all-time high, supported by the weakness of the US dollar and the decline in bond yields amid growing expectations of a significant cut in US interest rates this week.
-- In this regard, Federal Reserve fund futures indicate that investors are increasingly betting that the Federal Reserve will opt for a 50-basis point cut, with financial markets estimating a 59% chance, while the probability of a modest 25 basis point cut is 41%, according to CME's FedWatch tool.

This comes after the weekly US jobs report, which indicated a further decline in the Labor market, as evidenced by weak payroll data in August. Also, recent economic data has shown that inflation in the United States is heading towards a decline, although some stability remains. In addition, the gold index benefited from the European Central Bank’s decision to cut its main interest rate last week, reflecting growing confidence among policymakers that inflation in the region is steadily declining.

According to gold trading platforms, gold futures hit another record high on Friday as lower Treasury yields and a weaker US dollar supported the precious metal. Concurrently, spot gold prices have recorded more than twenty record settlements in 2024 and could reach $2,700 before the end of the year. Recently, gold prices recorded a weekly gain of about 3.2%, bringing its rise since the beginning of the year to about 26%.

In the same performance, silver prices, gold’s sister commodity, joined the rise, reaching $31.10 per ounce. Accordingly, the price of the white metal recorded a weekly gain of 10%, adding to its annual rise of 30%.

What supported the strength of the gold price rise?

The US Federal Reserve’s policy has sparked the rapid rise in gold prices. The US central bank is expected to cut interest rates at its Federal Open Market Committee (FOMC) meeting this week. The body could also signal further rate cuts over the next 15 months in its updated summary of economic projections. Meanwhile, other advanced central banks, such as the European Central Bank, are planning to ease monetary policy before 2025.

Moreover, as investors brace for rate cuts, traders are debating how aggressive the Fed will be. The CME FedWatch tool suggests that the futures market is divided on whether the institution will continue to cut rates by a quarter point or half a point to start the next easing cycle. In any case, a low-interest rate environment is beneficial for gold because it reduces the opportunity cost of holding non-yielding bullion.

Commerzbank analysts said: “The market still expects the Fed to cut US interest rates by around 100 basis points by the end of the year, meaning that rates will have to be cut by 50 basis points at one of the two remaining meetings after September. Gold is likely to rise on expectations of aggressive interest rate cuts in the coming months.”

In addition, the US dollar weakened on Friday, which is in Favor of dollar-denominated assets as it makes them cheaper for foreign investors to buy.

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Gold Price Forecast and Analysis Today:

Recently, gold price has advanced to trade at several levels above the 100-hour moving average line. As a result, gold price is trading at the overbought levels of the 14-hour Relative Strength Index. In the short-term, based on the hourly chart, the yellow metal price is trading inside an ascending channel formation. Also, the 14-hour Relative Strength Index supports a bullish bias after advancing to overbought levels. Therefore, bulls will seek to extend the current gains towards $2,610 or higher to the resistance at $2,641 per ounce. On the other hand, bears will seek to pounce on the declines at around $2,548 or lower to the support at $2,518 per ounce.

In the long-term, based on the daily chart attached, gold price is trading inside an ascending channel formation. Technically, the 14-day RSI supports a bullish bias as it is about to enter overbought conditions. Therefore, bulls will target long-term profits around $2,660 or higher at the $2,735/oz resistance. On the other hand, bears will look to pounce on pullbacks around $2,494 or lower at $2,419/oz.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.