Gold price forecast 2024: how high could Gold go?

Gold experienced a surge, testing USD 2475 at the start of the London session on Wednesday last week. This surge reinforced its reputation as a preferred safe-haven asset during times of economic uncertainty. The Federal Reserve’s hints at potential rate cuts and recent political developments have significantly influenced market sentiment, pushing gold prices to new heights.

Gold prices have been on the rise

This year, gold has risen by over 20%, driven by expectations of Federal Reserve rate cuts, geopolitical tensions, and substantial central bank purchases. On Monday, Federal Reserve Chair Jerome Powell stated that the Fed would not wait for inflation to reach the 2% target before implementing rate cuts, acknowledging the delayed effects of policy changes.

Powell’s statement, along with a 0.1% month-to-month decline in the June consumer price index, has strengthened market confidence in upcoming rate cuts.

According to the CME FedWatch tool, traders are now almost certain of a rate cut in September. Analysts at JPMorgan have noted that the anticipation of lower interest rates enhances gold’s appeal. As a non-interest-bearing asset, gold tends to perform well when interest rates fall. JPMorgan forecasts that gold prices could reach USD 2,500 per ounce by the fourth quarter of 2024, driven by increased investor demand through futures and ETF holdings.

Why is gold price rising?

Daniel Hynes, a senior commodity strategist at ANZ, pointed out that signs of slowing inflation and weak economic data have triggered the recent move in gold prices. Vivek Dhar from the Commonwealth Bank of Australia also emphasised gold’s resilience, predicting that prices could surpass USD 2,500 per ounce by the end of the year.

The upcoming US election has also impacted gold’s price movements. A potential second term for Donald Trump, with his tariff and tax policies, is seen as a factor that could increase inflation and widen the budget deficit. UBS analysts have suggested that political uncertainty could lead to market volatility, further boosting gold’s attractiveness as a safe-haven asset.

Divergent moves for copper and oil prices

While gold prices have reached record highs, this trend is not mirrored across all commodities, presenting a challenge for traders. Pro-cyclical commodities like copper and oil, which typically thrive in a healthy economy, have seen price declines. This divergence indicates underlying global economic troubles, with investors turning to gold amid fears of instability.

Copper, often considered a barometer of economic health due to its extensive use in construction and manufacturing, is not trending up like gold. Similarly, oil prices have been lacklustre, signalling that while investors hedge with gold, confidence in overall economic growth remains unsteady. For traders, this presents a nuanced landscape: gold’s strong performance suggests caution, while the underperformance of pro-cyclical commodities points to deeper economic issues that could affect broader market strategies.

Gold’s rise suggests increasing investor concern about the global economic outlook. The metal’s appeal as a safe-haven asset is particularly strong during uncertain times, providing a hedge against economic turbulence and inflationary pressures.

Despite worrying economic indicators, US equity investors remain optimistic. They believe the economic situation is “bad enough” to justify supportive monetary policy from the Federal Reserve, such as lower interest rates, but not so dire as to trigger a major economic crisis. This delicate balance has been termed a “Goldilocks economy”—neither too hot nor too cold. However, this equilibrium is fragile and may not last.

Several significant economic data releases are expected on Wednesday, including inflation figures from New Zealand, the UK, and the Eurozone, as well as US housing and industrial production data. These reports will provide further insights into the global economic situation and could influence gold prices and investor sentiment.

As we move through 2024, many traders will closely monitor Gold’s price trajectory. With geopolitical tensions, economic instability, and potential rate cuts on the horizon, gold could reach new record levels. Analysts’ predictions vary, with some forecasting prices well above USD 2,500 per ounce. However, the volatile nature of global markets and unforeseen economic developments will ultimately dictate just how high gold can climb in the coming months.

XAU/USD analysis: Gold’s technical outlook

At the time of writing, Gold’s path towards USD 2500 appears to be clear, with bullish signs evident on the daily chart. Prices are well above the moving average, and the RSI is rising sharply, indicating strong upward momentum. However, the RSI is now past 70 into overbought territory, hinting at the possibility of a slowdown.

Buyers aiming to breach USD 2,500 and move into uncharted territory could find it difficult to surpass the USD 2,520 psychological high. On the downside, sellers could find support at the USD 2,400 support and resistance level, with a further move down likely to be held at the USD 2,365 psychological support level.

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