The gold rally is beginning to look like it has stalled, said HSBC, and the precious metal may ease further unless there is a severe geopolitical risk escalation.
Gold rose to a record $2,685.42 per ounce on Sept. 26, and has gained around 28% so far this year – heading for the biggest annual gain in 14 years – fueled by the start of U.S. Federal Reserve interest rate cuts and geopolitical tensions.
Market Sentiment
However, the lack of a response so far Thursday to events in the Middle East may indicate that the gold market is becoming slightly inured to news from that region.
Right now, however, more “safe-haven” buying seems to be going into the US dollar than into gold, analysts at HSBC said, in a note dated Oct. 2.
“Gradually, the argument for 50bp of cuts by year end is outweighing expectations of 75bp of cuts. This could weigh on gold,” HSBC added. “Fed officials’ comments may take on added significance.”
Upcoming Data Release
The next major piece of data, the release for September, has the potential to push gold higher if the results are disappointing.
While the ADP release was positive, there is no firm correlation between that report and the Labor Department data.
Market Dynamics
Short of that, however, gold may head slightly lower as China – a major buyer – remains out of the market, the bank added.
Additional Insight:
– Geopolitical risks continue to play a significant role in the movement of gold prices, with any escalation likely to drive up demand for the precious metal as a safe-haven asset.
– The shift towards the US dollar for safe-haven buying could indicate a temporary preference for currency over gold, influenced by factors such as interest rate cuts and Federal Reserve policies.
– Monitoring key economic data releases, such as the Labor Department report, remains crucial for predicting future trends in the gold market and potential price movements.
– Chinese market activity, especially with regards to gold buying, can have a notable impact on the overall market dynamics and pricing trends.
