The record closing price in November is not enough for gold investors, as the strong momentum has pushed gold prices to historic highs before the weekend.
The latest trading price of spot gold on Friday (December 1st) was $2071.93 per ounce, up 1.76% on the day.
As the market continues to digest expectations of interest rate cuts as early as March, gold has ushered in a new buying momentum. Despite the central bank maintaining a tightening stance, precious metals are still rising. On Friday, Federal Reserve Chairman Powell stated that he still does not believe that the restrictive nature of monetary policy is enough to lower inflation rates to 2%.
However, the market pays little attention to Powell's remarks, as the CME FedWatch tool shows that the market's current pricing for a rate cut in the first quarter of 2024 is more than 50% likely.
Lukman Otunuga, Market Analysis Manager at Forexlive.com, said, "The Fed's reduction of bets still supports precious metals, while technical factors continue to support the upward momentum." "Without any new fundamental catalysts, this provides a foundation for bulls to push up prices."
Naeem Aslam, Chief Investment Officer of Zaye Capital Markets, said that this could be the beginning of a bigger trend for gold, with "bright days coming soon.".
He said, "No matter what some members of the Federal Reserve continue to say, we believe that the Fed has reached the peak of its interest rate hike cycle." "We believe that the Fed may indeed cut interest rates by the end of the first quarter of next year. However, the threat remains stubborn inflation. If we don't see CPI hovering at 3% or even lower, the Fed may keep interest rates at their current level until the end of the first half of next year."
Although the Federal Reserve's aggressive monetary policy still poses a risk to gold, some analysts suggest that an economic slowdown means that the Fed's next action will ultimately be to cut interest rates, which may be sooner rather than later.
Robert Minter, Director of Investment Strategy at Abrdn ETF, stated that the US commercial real estate market continues to experience cracks as the industry continues to feel the impact of the Federal Reserve's significant interest rate hikes and the vacancy caused by workers continuing to work from home.
Minter said that if this is a big "if", but if we see the commercial real estate foam begins to burst, there will be more money printing activities. This is a part of the gold price that we are seeing again today. Pricing will no longer increase interest rates, and there is a greater possibility of interest rate cuts in the near future. So we can usher in a gold bull market like the past three cycles of federal funds rates.
Minter added that the Federal Reserve has suspended tightening cycles in the past three times, and gold prices have risen by 57%, 235%, and 69% respectively. He pointed out that since the Federal Reserve shifted to a neutral stance, gold prices have risen by 5.4% so far.
Nicky Shiels, head of metal strategy at MKS PAMP, also pointed out that although economic data is still quite elastic, gold may be sought after by safe haven buying.
"Experts are talking about 'the breakdown of our economic health and social structure', but what's not particularly striking is that people just feel worse than before, and this is reflected through safe havens," she said.
Meanwhile, analysts point out that despite most retail investors avoiding the market, gold prices continue to rise. Analysts say that only when this sentiment begins to shift will gold prices truly fluctuate.
Despite this optimistic sentiment, some analysts suggest that investors remain cautious about gold at current levels and not chase the market.
Barbara Lambrecht, a commodities analyst at Commerzbank, said that gold prices may be subject to restrictions before the release of next Friday's non farm payroll report.
"This is because the current expectation of a 50 basis point rate cut by the Federal Reserve by mid-2024 is more likely to fall short. Therefore, we also expect a correction in the gold market. This may be triggered by the US labor market report," she said.
Some economists suggest that investors should also pay attention to the University of Michigan Consumer Confidence Survey, as inflation expectations have risen in recent months.
Phillip Streible, Chief Market Strategist at Blue Line Futures, said he also believes that the market is a bit ahead because the Federal Reserve is unlikely to cut interest rates until inflation approaches its target of 2%.
Next week's economic data:
Tuesday: Vacancies in ISM service industry PMI and JOLTS positions in the United States
Wednesday: ADP Private Sector Employment Situation, Bank of Canada Monetary Policy Decision
Thursday: Weekly number of people applying for unemployment benefits
Friday: Non farm payroll, University of Michigan consumer confidence survey
