Gold prices surged past the $2,600 mark for the first time on Friday, continuing a rally fuelled by expectations of further US interest rate cuts and increasing geopolitical tensions in the Middle East. Spot gold climbed by 1.3%, reaching $2,620.63 per ounce by 1:43 p.m. ET (1743 GMT), while US gold futures closed 1.2% higher, settling at $2,646.20.
One of the primary factors driving the gold price increase is the Federal Reserve’s recent rate cut. The Fed reduced rates by 50 basis points and indicated that up to 200 basis points of easing could occur over the next two years. However, the reaction from gold markets has been somewhat muted due to comments from Fed Chair Jerome Powell, who mentioned that the central bank is not rushing to lower interest rates. He added that the Fed is in the process of recalibrating its approach to monetary policy, suggesting that any further rate cuts may not be immediate.
Geopolitical instability, particularly in the Middle East, has also been a significant factor behind the rising gold prices. In 2024 alone, gold has risen 27%, marking its largest annual gain since 2010. Investors are increasingly turning to gold as a hedge against uncertainty driven by prolonged conflicts in regions such as Gaza and Ukraine. As noted by Forex.com analyst Fawad Razaqzada, these geopolitical risks are expected to keep sustaining the demand for gold as a safe-haven asset.
Another contributing factor is the continued weakness of the US dollar. When the dollar depreciates, gold becomes more affordable for buyers using other currencies, which increases demand. A weaker dollar often indicates broader economic uncertainty or inflationary pressures, further encouraging investors to seek stability in gold. Analysts have pointed out that the current conditions provide additional momentum for gold’s rise in value.
The movement of gold into new record highs also highlights an acceleration in upward momentum. The current price levels are significantly above the 20-Day Moving Average, with a noticeable steepening in the internal uptrend line. Analysts have suggested that the next target for gold could be around $2,724, representing a 447-point gain since the February lows. This projection aligns with the upward swing seen in late June, which provides further support for this target.
From a technical analysis perspective, the price appears to be gravitating toward the $2,640 level, which corresponds to the 161.8% Fibonacci extension from the upward trend that began in August 2018 and peaked in August 2020. This was followed by a two-year period of sideways trading, culminating in a significant decline in late 2022, which then set the stage for the current rally. According to Alex Kuptsikevich, Senior Market Analyst at FxPro, if gold continues to follow its typical two-year cycles, we could soon see the momentum taper off, leading to either a sideways movement or a sharp reversal, similar to the pattern observed in 2011.
While there is no immediate indication of a reversal, the rally may still have further to run, with the possibility of a massive short squeeze driving prices even higher. Nevertheless, traders should remain cautious and watch for any signs of exhaustion in the growth trend, which could result in a sharp correction.
London-listed company KEFI Gold and Copper plc (LON:KEFI) is an exploration and development company focused on gold and copper deposits in the highly prospective Arabian-Nubian Shield. The Company operates in Ethiopia and Saudi Arabia with projects including Tulu Kapi project, Jibal Qutman EL and Hawiah.
