Gold Hits All-Time-High

08 Mar 2024

By Priyanka Sachdeva, Senior Market Analyst for Phillip Nova

 

Summary

  1. Both Powell’s testimony and the FED’s “Beige Book” pushed bets in favour of the first rate cut in June.
  2. Gold players await further clarity on US labour market activity from the upcoming Nonfarm payrolls.
  3. Despite gold bullion’s bullish technical outlook, caution is warranted, amid the overbought RSI indicator.


A sneak peek at Precious Metals with Priyanka Sachdeva

Gold prices have been increasing for eight consecutive sessions and reached a new high on Thursday. However, the gains in this safe-haven asset may be limited due to a slight rise in the US Dollar. On Friday morning, gold hovered above the $2160 mark for the third consecutive session, indicating that it is consolidating at a new lifetime high, slightly above the previous peak reached at the end of 2023.

 

 

LOCO London Spot Gold (XAUUSD) is currently trading around $2160.45 per ounce, which is slightly lower compared to yesterday’s closing price. It is worth noting that the current gold prices are highly overbought on RSI indicators, and the recent increase in the value of the US Dollar should be a point of concern for gold bulls, despite the speech given by Powell and the “Beige Book,” both of which have strengthened the hopes of the first Fed rate cut in the second half of 2024. A low-interest rate environment translates into reduced opportunity cost of holding non-yielding gold and weighs on the dollar, making bullion cheaper for overseas buyers.

 

Regardless of the breakout and the fact that the medium-term outlook for Gold might have just changed to bullish, the current surge is primarily driven by market anticipation of the FED easing starting in June, any alteration to this plan could potentially lead to chaos. I strongly feel there’s a disconnect between Powell’s speech and what the markets inferred from it. Given the lack of clarity on the timeline of the FED’s easing, the US Dollar can soar in the Medium term which is challenging for Gold’s safe-haven investment appeal.

 

Further market direction could come from Friday’s US Nonfarm payroll report meanwhile Central Bank’s spree for Gold purchases is expected to continue. A robust jobs report could defend Powell’s relatively reluctant stance, prompting Bullion investors to re-calculate dovish bets on the FOMC policy path. This scenario should weigh on gold prices. Meanwhile, with persistent underlying favorable signals from easing inflationary pressures, de-dollarisation of developing economies, microeconomic situation, and geopolitics, the growth of gold bulls in the first half of the year may eye breach above $2,200 per troy ounce.

 

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