Gold prices are defying expectations and traditional market forces, hovering near record highs. The precious metal inched up slightly on Wednesday, holding steady for a second consecutive day. This resilience comes despite Federal Reserve Chair Jerome Powell signaling a possible delay in interest rate cuts, a move that typically strengthens the dollar and weakens gold.
Spot gold edged 0.1% higher to $2,387.12 per ounce by mid-morning EDT, staying close to its all-time high reached last week. Analysts are surprised by gold’s strength, given the Federal Reserve’s hawkish stance, which usually leads to a stronger dollar and weaker gold prices (since gold offers no interest). However, ongoing geopolitical tensions, particularly in the Middle East, are driving demand for safe-haven assets like gold.
“The precious metal is technically overbought from a technical perspective,” said Lukman Otunuga, senior research analyst at FXTM. “But bulls are drawing strength from the overall uncertainty across markets with geopolitics overshadowing data and monetary policy expectations.”
Gold has surged roughly 16% so far in 2024, adding more than $500 per ounce since October. The conflict in the Middle East is considered a major turning point for gold prices.
Experts caution that while gold has shown little correlation with the U.S. dollar and Treasury yields recently, it may still react to short-term movements in both.
Beyond Geopolitics, Other Factors Bolster Gold
Geopolitical tensions aren’t the only factor propelling gold prices. Central banks are actively buying gold, and demand from Chinese consumers remains robust. Capitalizing on these trends, Goldman Sachs recently raised its gold price forecast to $2,700 per ounce, citing the metal’s stability following the latest U.S. inflation data.
Central banks have been net buyers of gold for years, and that trend shows no signs of abating. These institutions view gold as a safe and reliable hedge against inflation and economic uncertainty. Their continued buying pressure helps to support gold prices.
China is the world’s largest gold consumer, and demand from the country remains healthy. Chinese consumers are buying gold for jewelry, investment purposes, and as a hedge against a weakening yuan. This strong demand helps to underpin gold prices globally.
Goldman Sachs Bullish on Gold
Goldman Sachs is not the only investment bank bullish on gold. Several analysts believe that gold prices could continue to rise in the coming months, driven by geopolitical tensions, inflation concerns, and central bank buying.
Whether gold can maintain its current rally remains to be seen. The geopolitical situation, inflation data, and the Federal Reserve’s monetary policy decisions will all play a role. However, the factors currently supporting gold prices – geopolitical tensions, central bank buying, and strong consumer demand – suggest that the precious metal’s bull run may not be over yet.
Source: Mining.com
