In a remarkable turn of events, the price of gold has surged to a six-month high, closing the month of November just above the significant $2,000 mark. The precious metal’s journey has been marked by a series of notable events, including a breakout from its consolidation range and a swift recovery from a two-week retracement.
Commencing from the low on October 6th at $1,810, gold experienced a substantial uptick of nearly $200 or 11% in the subsequent three weeks, reaching $2,009. A retracement brought the prices back to the 200-day moving average, standing at $1,933 by mid-November. However, resilient new buyers emerged at this crucial support, facilitating a prompt recovery.
The past trading week witnessed gold prices consistently approaching the psychological $2,000 mark, culminating in a closing at $2,046. This breakthrough has triggered discussions about a potential breakout rally, with analysts closely eyeing the next level of significance.
A similar situation occurred approximately 14 years ago when XAU/USD was grappling with the $1,000 mark. It was only after the first monthly closing above $1,000 in late September 2009 that an explosive breakout rally unfolded, resulting in a surge of around 25% to $1,225 over the next three months.
The recent surge in gold prices is attributed to multiple factors, including a weaker dollar and growing conviction among investors that the US Federal Reserve has concluded its interest rate hikes.
Ewa Manthey, commodities strategist at Dutch bank ING, highlighted the significance of the US rate outlook, stating, “The US rate outlook is the key driver for gold. Lower rates are typically constructive for gold, because it doesn’t yield any interest.”
Fears of an escalation in the Israel-Hamas conflict have also contributed to the rise in gold prices, positioning the precious metal as a safe haven asset.
Analysts predict that gold could test its all-time high of just below $2,075 per ounce by the end of 2023. ING forecasts continued strength, projecting an average of around $2,100 per ounce in the fourth quarter of 2024, surpassing the previous record high.
Central banks’ sustained demand for gold has played a pivotal role, with 1,136 tonnes purchased last year and 800 tonnes acquired over the first three quarters of 2023, according to the World Gold Council.
Despite the remarkable performance of gold, the NYSE Arca Gold Miners index, tracking industry groups, has gained just 1% since the start of 2023. Miners grapple with rising costs, including labor, fuel, and materials, along with higher borrowing costs.
Silver prices have outpaced gold in recent days, jumping more than 4% since last Thursday. Ross Norman, chief executive of Metals Daily, suggests that this surge in silver may be speculatively driven, influenced by expectations of the Fed cutting rates.
Information for this briefing was found via Financial Times, Investing.com, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
