Gold Rally Continues: What's the Next Target for Bulls?

The market currently gives a 50% chance to the Fed's 50 basis point rate cut. This also supports the rising trend in gold prices. Weakening dollar and geopolitical tensions, including fear of the US election, increase the safe haven appeal of gold. Technical analysis also indicates the potential for reaching these levels in the coming days, pointing to further gains for gold.

Gold rose on speculation of interest rate cut and weakness in the dollar

Gold prices climbed on Monday, approaching their all-time high. The yellow metal reached $2,589.72 but remained below the psychological level of $2,600. The upward momentum is due to the expectations of a Fed interest rate cut and the weakening dollar, making gold more attractive to investors seeking a safe haven. Expectations of a Fed rate cut this week significantly supported gold prices. According to CME FedWatch tool, traders now see the probability of a 50 basis point cut, which was at 28% a few days ago, at almost 50%. Former New York Fed President Bill Dudley advocated for a larger cut to stimulate economic growth, boosting momentum. This stance, combined with dovish news from the Financial Times and the Wall Street Journal, fueled the bullish sentiment for gold.

However, the core inflation data announced last week complicates the narrative. The Consumer Price Index (CPI) report showed that core inflation increased above expectations. This has made the possibility of an aggressive interest rate cut more difficult. As Seema Shah, Chief Global Strategist at Principal Asset Management, pointed out, 'Core inflation is still too high for the Fed to confidently implement a 50 basis point cut.' This concern reduces optimism in the market. Therefore, most traders are still betting on a 25 basis point cut.

Macroeconomic and geopolitical factors are increasing the attractiveness of gold

As you follow from Kriptokoin.com, there are multiple tailwinds for gold. In addition to the Fed's decision, other factors are contributing to the upward trend of gold. Geopolitical tensions, including uncertainty about the US election, have increased safe haven demand. The recent assassination attempt on presidential candidate Donald Trump added another layer to market risk, directing investors towards gold as a refuge. Furthermore, the weakening of the US dollar, which fell by 0.4%, has made gold more attractive for foreign investors.

Gold price projections are signaling more gains

Market analyst James Hyerczyk evaluates the overall outlook and technical picture of the gold market. Based on the recent price action, gold is preparing to continue its upward climb. From June to mid-July, gold gained $190.05 over 15 market sessions. It followed a similar trajectory from July to mid-August, recording a rise of $178.58 over 18 sessions. Furthermore, current technical indicators suggest that a similar rise could push gold towards the range of $2,649.43 to $2,660.90 in the coming days.

Gold prices daily chartFed's expectations of interest rate cuts, ongoing geopolitical concerns, and a weakening dollar are likely to lead to further upward momentum in gold prices in the short term. If the Fed prefers a 50 basis point cut, it is possible for gold to exceed its current levels. However, even with a 25 basis point cut, the overall outlook remains positive. In addition, investors are expecting prices to test new highs. Investors need to pay attention to volatility after the Fed's decision. However, the long-term outlook for gold remains strong.

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