Gold prices continue their remarkable ascent, defying market downturns as the precious metal surged to a historic high on Wednesday, potentially marking its seventh consecutive day of gains. However, amidst this rally, a cautionary note has emerged from at least one analyst.
On Wednesday, continuous-contract gold futures rose by 0.5%, reaching an unprecedented $2,308.80 per troy ounce. With a remarkable 10.5% surge this year and a 3.5% increase over the past five days, gold stands resilient amidst declines in stock and bond markets. Despite setbacks in the Dow Jones Industrial Average and the S&P 500, gold maintains its upward trajectory.
Analyst Achilleas Georgolopoulos from broker XM remarked, “Gold continues to defy gravity, showing unprecedented strength and rallying under various market conditions.”
Indeed, gold’s recent gains come amidst seemingly conflicting factors. While expectations of an impending Federal Reserve interest rate cut typically bolster gold by lowering bond yields and the dollar, recent inflationary signals in economic data have challenged these rate-cut speculations, prompting traders to turn to gold as an inflation hedge.
Georgolopoulos noted, “Gold has rallied even on days when the dollar strengthened, indicating other significant factors at play, such as robust buying interest from sovereigns diversifying their dollar holdings.”
However, amidst this bullish sentiment, cautionary voices arise. Kathleen Brooks, an analyst at broker XTB, highlighted potential warning signs, pointing out that open interest on gold contracts has possibly peaked, and the gold price now stands 15% above its 200-day simple moving average, suggesting overextended levels that could warrant a pullback.
While a correction might dampen gold’s momentum, some analysts argue that underlying factors support continued gains, suggesting that betting against gold may not be advisable just yet.
