Gold Glitters at Record Highs: Fed Rate Cut Looms Amid Global Tensions

Gold prices have soared to record highs amid expectations of an impending Federal Reserve interest rate cut and increasing safe-haven demand driven by global geopolitical tensions and the upcoming US presidential elections. The precious metal surged over 20% this year, reaching new all-time highs and attracting significant interest from both institutional and retail investors. Gold exchange-traded funds (ETFs) have also experienced substantial inflows, pushing global assets under management (AUM) to a record $257 billion. Analysts predict that gold’s upward trajectory may continue, with some forecasting prices to reach $3,000 per ounce by mid-2025. Technical indicators support the bullish trend, yet signs of a potential market correction suggest investors should proceed with cautious optimism.

Gold reached new record highs, continuing a rally fueled by expectations of an impending Federal Reserve interest rate cut. Gold reached $2589.48 per troy ounce yesterday, putting it on track for a weekly gain of over 3.25%. The metal has risen more than 20% this year, supported by central bank buying, demand as a safe haven amidst global conflicts, and growing interest from retail investors.

The anticipated Fed rate cut, possibly as large as 50 basis points, has driven traders to increase their bullish bets on gold, which typically benefits from lower interest rates. Additionally, investor interest in gold exchange-traded funds (ETFs) has also contributed to the rise of gold. The weakening US dollar further supported gold’s price and modest silver, platinum, and palladium gains.

In August 2024, global gold ETFs experienced inflows for the fourth consecutive month, adding $2.1 billion. According to the World Gold Council, this increase was mainly driven by strong demand from Western funds. These inflows pushed global assets under management (AUM) to a record $257 billion. Total gold holdings rose by 29 tonnes to 3,182 tonnes by the end of the month, continuing a four-month rebound. North America led inflows with $1.4 billion due to dovish signals from the Fed and geopolitical tensions, while Europe saw more modest inflows. Asia also continued to see inflows, though at a slower pace. Additionally, South Africa and Australia recorded strong inflows.

Here are the year-to-date returns of selected Gold ETFs that have shown returns higher than 24.8%:

• iShares Gold Trust: 24.84%
• Goldman Sachs Physical Gold ETF: 24.88%
• ABRDN Physical Gold Shares ETF: 24.86%
• GraniteShares Gold Trust: 24.93%
• SPDR Gold MiniShares: 24.91%

Gold prices have been reaching new record highs, with analysts predicting further increases as the upcoming US Federal Reserve meeting approaches. Analysts mention that gold thrives from uncertainty, highlighting factors such as the 2024 election year and heightened tensions in the Middle East and Ukraine. These geopolitical uncertainties are boosting gold’s appeal as a safe-haven asset.

Another key driver is the growing expectation of a Federal Reserve interest rate cut this week. Lower interest rates reduce the opportunity cost of holding gold compared to interest-bearing assets like Treasurys and tend to weaken the US dollar, making gold more attractive to investors holding other currencies.

Analysts anticipate that gold prices could reach $3,000 per ounce by mid-2025, with a fourth-quarter 2024 average forecast of $2,600 per ounce.

Gold has recently hit a new all-time high of $2,589.49 per troy ounce, surpassing its previous record of $2,585.95 set on September 13. Positive market sentiment, geopolitical tensions, and the upcoming US presidential elections are driving the metal’s rise. Technical indicators, such as the Bollinger Bands, the Relative Strength Index, the Momentum oscillator, and the Exponential Moving Average, also support the uptrend. In particular, prices are above the 50-period Exponential Moving Average, the Momentum oscillator, and the Relative Strength Index register values above the 50 and the 100 baselines, respectively. Also, the widening of Bollinger Bands and prices closing above the Upper Band signal the continuation of the uptrend. However, there is a negative divergence between the oscillators and the price, suggesting that a potential market correction may be imminent. Using the Fibonacci Retracement tool on the most recent swing on the charts, the following price targets may be estimated: $2,628.25 and $2,724.98.

In conclusion, safe-haven demand, expectations of a Federal Reserve rate cut, and global geopolitical tensions drive gold’s rise to record highs. With positive market sentiment and technical indicators supporting the bullish trend, analysts project further potential gains, reaching $3,000 per ounce by mid-2025. However, signs of a possible market correction suggest that investors should remain cautious while eyeing key price targets.