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28/08/24
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Gold Prices Surge Past $2,500 Amid Geopolitical Tensions and Fed Dovishness
In early trading on Wednesday, gold prices continued their upward trajectory, surpassing $2,500 per troy ounce. This increase is largely driven by escalating geopolitical tensions in the Middle East and the recent dovish sentiments expressed by the Federal Reserve, particularly in light of the Fed chairman indicating a potential shift toward lowering interest rates. Such a stance diminishes the opportunity cost associated with holding gold, a non-yielding asset.
Market participants are keenly awaiting insights from Fed officials Christopher Waller and Raphael Bostic, whose addresses on Wednesday are expected to provide additional clarity on the future of U.S. interest rates. The economic landscape will also be influenced by upcoming data releases, including the U.S. Gross Domestic Product (GDP) figures and Personal Consumption Expenditures (PCE) Index, which are set for publication later in the week. Strong economic data could bolster the U.S. Dollar, potentially limiting further gains for gold.
The heightened demand for gold can also be attributed to a significant military operation taking place in northern West Bank, marking the largest military action in that region in over two decades. As global uncertainties rise, investors are gravitating toward gold as a safe haven. Reports indicate that gold exchange-traded fund (ETF) holdings surged by 15 tonnes last week, reaching their highest level in six months, reflecting heightened speculative interest.
Meanwhile, U.S. consumer confidence improved, reaching a six-month high, although the housing market displayed signs of weakness with a slight decline in the Housing Price Index. The futures market has largely accounted for a 25 basis points rate cut by the Fed in September, with traders anticipating further reductions throughout the year.
From a technical perspective, gold maintains a robust outlook, trading above its key 100-day moving average. Resistance levels are identified at $2,530, closely approaching an all-time high, while initial support is found at $2,500. Observers are closely monitoring these price points for potential breakouts or corrections in the gold market.
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