By Joe Hoppe
Gold Futures Surge to New Record High
Gold futures soared to a new all-time high overnight, driven by rising hopes for interest rate cuts, falling U.S. Treasury yields, and escalating geopolitical tensions. The price of August gold futures on the New York Mercantile Exchange climbed 0.2% to $2,472 a troy ounce, reaching as high as $2,487.4 during the session. This surpasses the previous record of $2,477 set on May 20. The recent surge in gold prices has been fueled by a combination of factors that are likely to push them even higher in the near future.
Rate-Cut Expectations Drive Bullion Demand
The anticipation of interest rate cuts from the U.S. Federal Reserve in the coming months has significantly boosted the demand for precious metals. Historically, gold has had an inverse relationship with interest rates, making it more appealing to investors during periods of rate cuts. This trend is expected to continue, leading analysts to predict that gold prices could soon hit the $2,500 per ounce milestone.
Potential for Correction Amid Overbought Conditions
While the bullish momentum in the gold market is strong, some analysts caution that profit-taking could occur once prices breach the $2,500 level. Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, noted that gold is currently in overbought territory, suggesting that a minor downside correction might be necessary for a healthy market. Despite this, the overall resilience of gold prices throughout the year has been remarkable.
Positive Skew in Uncertainty Favoring Gold
Commonwealth Bank of Australia analyst Vivek Dhar highlighted the positive outlook for gold prices in the coming months. While there is uncertainty in the market, Dhar believes that the risk is skewed towards gold surpassing the forecasted $2,500 per ounce by the end of the year. This positive sentiment reflects the ongoing appeal of gold as a safe-haven asset in times of economic and political uncertainty.
Overall, the current market conditions and outlook suggest that gold prices are poised to continue their upward trajectory, with potential for further gains in the foreseeable future.
Write to Joe Hoppe at joseph.hoppe@wsj.com
(END) Dow Jones Newswires
07-17-24 0432ET
