Gold prices hit a record level of $3,759 today and have risen approximately 43% since the beginning of the year, outperforming high-risk assets such as Bitcoin and U.S. stock indices.
Several factors support the continued positive momentum in gold prices, including:
- A dovish monetary policy environment, with the U.S. Federal Reserve cutting interest rates by 25 basis points last week during its meeting— the first rate cut under President Trump’s administration, as anticipated.
- The “dot plot” forecasts indicating an additional 50 basis points cut in interest rates during the current year.
- Weakness in the U.S. dollar against most major foreign currencies, as the Dollar Index—which measures the dollar’s performance against six major currencies—has declined by 10% since the start of the year, with expectations for further declines ahead.
- Persistent political pressure from U.S. President Donald Trump on the Federal Reserve.
- Inflation risks in the U.S., where the inflation rate remains around 3%, above the target of 2%, positioning gold as a hedge against inflation. Additionally, a slowdown in the U.S. labor market raises the risk of stagflation.
- Public finance risks globally, especially in the U.S., where national debt continues to rise to $37 trillion amid widening fiscal and trade deficits.
- Ongoing geopolitical tensions, such as the Russia-Ukraine conflict, which remains unresolved.
- Uncertainty surrounding trade tensions between the Trump administration and other countries, with tariffs continuing to be a key policy focus.
- Central bank purchases, particularly by the People’s Bank of China, which is increasing its gold reserves, supporting demand and prices.
From a technical perspective, indicators suggest the gold uptrend is likely to continue for the following reasons:
- The 20-, 50-, and 200-day moving averages are aligned in an upward trajectory, with the 20-day moving average above the 50-day, and the 50-day above the 200-day moving average.
- The Relative Strength Index (RSI) currently stands at 78, placing it in the overbought zone and reflecting strong bullish momentum.
- The Positive Directional Indicator (DMI+) is around 39 points, compared to the Negative Directional Indicator (DMI-) at about 10 points, indicating strong buying pressure. Importantly, the Average Directional Index (ADX) is near 47 points, confirming the strength of this upward trend.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
