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On Tuesday, gold reached a historic peak, driven by expectations of U.S. monetary easing and persistent geopolitical uncertainties, attracting momentum-driven funds. The surge in demand is supported by strong fundamentals, including robust physical demand in Asia, central bank acquisitions, and its status as a safe-haven asset.
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Rhona O’Connell from StoneX noted the self-fulfilling dynamics of this surge, triggering stop orders and drawing momentum funds. From a technical standpoint, gold could potentially climb to $2,180, as indicated by a Fibonacci projection.
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The upcoming economic data and testimonies from Fed Chair Powell hold significant importance, according to Alexander Zumpfe of Heraeus.
Independent analyst Ross Norman predicts a rise to $2,300 within six months, anticipating Federal Reserve rate cuts. However, gold-backed ETF holdings, particularly SPDR Gold Trust’s GLD, have decreased by 7% this year.
Gold has extended its gains in the last two trading sessions, recording an almost 3.5% increase, equivalent to $70. Prices are close to the previous all-time high in December, and increased market volatility has some anticipating a retest of this significant milestone.
Despite the absence of a corresponding decline in U.S. yields or the dollar to justify such an upswing, significant gold purchases by central banks globally may be influencing the paper price of gold. Additionally, growing confidence in the likelihood of a Fed rate cut in June could be contributing to the rally.
Lower interest rates make the non-interest-bearing metal more attractive, typically resulting in higher gold prices. The safe-haven appeal of gold remains relevant, especially amid ongoing conflicts in eastern Europe and the Middle East. However, positive risk sentiment in equity markets, marked by all-time highs in major indices, is diminishing the impact of gold's safe-haven appeal on price support.
This week's critical events/data include non-farm payrolls and the ECB rate-setting meeting. Traders will closely monitor U.S. services PMI data, with concerns arising from Friday's manufacturing print. Powell's congressional testimony and the ECB's monetary policy updates are also on the agenda. Super Tuesday, where most of U.S. states cast their votes in the presidential primaries, adds an additional note of significance to the day.
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