Since 2017, gold has consistently experienced a decline in September, with an average drop of 3.2 percent during this month, making it the worst-performing month of the year. This significant underperformance is in contrast to the monthly average gain of 1 percent, as reported.
Gold’s recent gains have been driven by the expectations of an impending monetary policy easing by the Federal Reserve. Fed Chair Jerome Powell’s recent indication of the necessity to reduce interest rates has further fueled these gains. The pace and extent of these potential cuts will play a critical role in determining whether gold continues its upward trend.
Gold has seen a substantial 22 percent surge in value this year, with an 8 percent increase since July. The rise in gold prices can be attributed to strong central bank purchases, increased demand for safe-haven assets due to geopolitical tensions, and steady buying of physical bars in the over-the-counter market.
However, Jateen Trivedi, VP Research Analyst at LKP Securities, points out that the expected 0.25 basis point rate cut by the Federal Reserve in September has already been priced into gold prices. Any further increases in gold value may necessitate a more aggressive rate cut or an unexpected 0.50 basis point cut during the September meeting. This could result in gold facing resistance levels, leading to a trading range of $2,465 to $2,525 in Comex and 70800-72400 in MCX.
Insights into Gold Prices in September 2024
According to Trivedi, gold is likely to experience volatility with significant shifts in expectations for rate cuts directly influencing its pricing trends.
Trivedi also highlighted that market participants will closely monitor key upcoming data releases such as the Core PCE Price Index, inflation figures, non-farm payrolls, and unemployment data. These indicators could offer additional clarity and potentially alter sentiment, impacting the movement of gold leading up to the September policy meeting.
Additionally, experts foresee a potential fresh rally in the gold market in the near future.
Rahul Kalantri, VP Commodities at Mehta Equities Ltd., mentioned that while the market has already factored in a 25 basis point rate cut by the Fed in September, a more aggressive rate cut or a more dovish stance signaling further rate reductions could trigger a new rally in gold prices. These actions would suggest a more accommodative monetary policy, potentially weakening the U.S. dollar and lowering yields, both of which are supportive of gold prices.
Additional Insights:
In analyzing gold prices, it is crucial to consider various factors such as geopolitical tensions, central bank policies, and macroeconomic indicators. These elements, along with market sentiment and expectations regarding monetary policy, can significantly impact the trajectory of gold prices. Traders and investors must stay abreast of these developments to make informed decisions in the precious metals market.
