Gold pops, all time highs on the horizon
Today's six-month high hints at gold breaking records. Dollar weakness and Fed's decisions fuel optimism. Key moments ahead
Today, gold reached a six-month high, reigniting the possibility of testing all-time highs. The focus is on a stubborn triple top pattern that has kept gold below $2,080 since 2020. This resistance has been tested three times – in August 2020, May 2022, and May this year. The big question now is whether the fourth attempt will succeed, pushing gold above $2,080 and signalling a significant technical breakout beyond $2,100.
The uptick in gold prices today is linked to a weaker dollar and growing expectations of a temporary pause in the Federal Reserve's monetary tightening. The easing of Treasury yields is also playing a role in supporting gold.
During the Asian session, spot gold hit $2,018 per ounce, settling at $2,009 by 17:00 GMT – the highest level since May this year. U.S. gold futures also saw an increase.
The direction of gold hinges on the Federal Reserve's stance on interest rates. If the central bank concludes its current rate-hiking cycle, gold is set to trade higher. Traders are anticipating that the Fed will keep rates steady in December, with about a 50% chance of a rate cut in May next year, according to CME's FedWatch Tool.
Lower interest rates are crucial for boosting gold prices, as they reduce the opportunity cost of holding non-interest-bearing assets. Thus, if the Fed takes a more dovish approach, it could further drive up gold prices.
Looking ahead, investors are closely watching two significant events this week – the release of U.S. third-quarter GDP figures on Wednesday and the PCE price index, the Federal Reserve's preferred inflation gauge, on Thursday. These economic indicators are likely to influence market sentiment and impact gold's trajectory in the coming weeks. As gold approaches potential all-time highs, the next few weeks will be crucial for investors tracking this precious metal.
