By Samir Al Khoury,
Gold continues its upward trajectory, reaching a new record high of $2,521 today. This positive momentum shows no signs of slowing down, as the price of gold has risen by approximately 27% since hitting a low of $1,984 on 14 February 2024, culminating in today’s peak of $2,521. Given these developments, gold can be considered to be in a bull market.
Several key factors are likely to support this trend:
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Geopolitical Tensions: Ongoing conflicts in the Middle East, the Red Sea, and the war between Russia and Ukraine are driving increased demand for gold as a safe haven.
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Interest Rate Expectations: Anticipated cuts to US interest rates, with the first potentially occurring in September, are expected to provide further momentum to gold, an asset that does not generate yield. Lower interest rates enhance gold’s attractiveness.
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Weakening US Dollar: The decline in the US dollar index, which tracks the dollar against a basket of six major currencies, alongside a drop in US Treasury bond yields across various maturities, also favours gold.
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Global Economic Uncertainty: The likelihood of an economic recession in the United States—the world’s largest economy—in the coming period adds to the demand for gold.
In addition, gold remains an attractive hedge against inflation. The US core consumer price index (CPI) recorded an annual increase of 2.9% in July 2024, still above the Federal Reserve’s target rate of 2%.
Markets are closely watching the upcoming speech by US Federal Reserve Chairman Jerome Powell at the Jackson Hole symposium, seeking insights into the future path of interest rates. This event is expected to have a direct impact on various financial instruments, particularly gold.
Technical Outlook
From a technical perspective, several indicators suggest continued strength in gold prices:
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Moving Averages: The 20, 50, and 200-day moving averages are aligned in an upward trend, with the 20-day average crossing above the 50-day average and the 50-day average surpassing the 200-day average.
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Relative Strength Index (RSI): Currently at 66 points, the RSI indicates strong upward momentum for gold.
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MACD Indicator: The MACD has crossed above the Signal Line and remains in positive territory, reinforcing the positive outlook for gold.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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