Gold investors should anticipate that this precious metal will face further selling pressure. The market trend far exceeded interest rate expectations.
Although the final interest rate cut will push up gold prices, the potential easing policy in March may still be too early. Some analysts point out that the gold market is not a good judge of the possible shift in monetary policy.
Suki Cooper, a precious metals analyst at Standard Chartered Bank, stated in a recent report: Gold has benefited from the market's assessment of interest rate cuts and escalating geopolitical tensions, which have boosted safe haven demand. However, gold prices may have entered an overbought zone, and in the past two years, gold prices have prematurely reflected monetary policy expectations. Although we expect the Federal Reserve's next move to be a rate cut, we do not expect it to become a reality immediately.
Cooper added that she expects the recent trend of gold prices to be mainly driven by the health of the US job market. She explained that an increase in unemployment may force the Federal Reserve to align with market expectations. According to the Federal Reserve observation tool of the Chicago Mercantile Exchange (CME), the market expects a probability of over 60% for a rate hike in March and has fully absorbed the impact of the May rate cut.
Carsten Fritsch, a precious metals analyst at Commerzbank, said he expects neither the Federal Reserve nor the European Central Bank to cut interest rates in the first half of next year.
He said, "If the forward-looking interest rate expectations have to be lowered, it is possible for gold prices to further decline. We expect that gold prices will continue to rise to $2100 per ounce in the second half of next year when the Federal Reserve starts cutting interest rates."
Some analysts have stated that as investors profit from the breakthrough rise in gold prices, the key level for gold prices will be $2000 per ounce.
"Although the fundamentals are still favorable for bulls, from a daily chart perspective, the technical side seems bearish. Due to geopolitical tensions and key US economic data, including the non farm payroll report, precious metals may experience more volatility this week. At the same time, negative momentum may pull gold prices to psychological levels of $2000 in the short term," said Lukman Otunuga, senior market analyst at FXTM
Although it is expected that the gold market will experience some weakness in the near future, Nicky Shiels, Metal Strategy Director at MKS PAMP, stated that there is still great potential for gold in 2024.
She said, "We still maintain a constructive attitude towards gold, and our bullish expectations have advanced to the first quarter of next year. We do not believe that last night's collapse/explosion is the 'it' of next year. The ongoing de dollarization and/or potential concerns about the upcoming economic recession (where anti inflationary trends may allow the Federal Reserve to cut interest rates) are now bullish rather than just supportive."
Many analysts believe that the missing aspect of the gold market is still investment demand from the West. Even though gold prices have soared to historic highs, investing in gold exchange traded products has remained lukewarm.
At a webinar on Tuesday, Michael Widmer, a metals strategist at Bank of America, stated that although he is optimistic about the gold price trend in 2024, the market needs to see actual interest rate cuts before investors enter the market.
He said, "The gold market needs to see broader investment space to maintain higher prices." "People are waiting for the Federal Reserve to come up with tangible things before investing in gold."
On December 6th at 11:22 Beijing time, spot gold reported $2022.80 per ounce
