Since October 6th, 2023, gold prices have been on a remarkable upward trajectory, consistently breaking through to new all-time highs. Despite showing signs of deceleration since mid-April 2024, the bullish sentiment remains firmly in control of the market. This persistent upward trend highlights strong investor confidence and underlying demand driving gold prices to unprecedented levels.
Review
Starting from a low of USD 2,353 on July 25th, gold has continued to push upwards over the past four weeks. Last Friday, prices surpassed the magical USD 2,500 mark for the first time. The momentum carried into the first half of this trading week, resulting in a new all-time high of USD 2,531 on Tuesday.
The ongoing geopolitical tensions in the Middle East, the conflict between Ukraine and Russia, and expectations of possible interest rate cuts by the US Federal Reserve have also contributed to rising prices. Geopolitics have played a crucial role since early October, leading to increased demand for gold as a safe haven.
Despite a sharp pullback in early August, gold prices quickly recovered and continue to reach new all-time highs, showcasing impressive strength compared to stock markets.
Chart Analysis – Gold in US-Dollar
Weekly chart: Final exaggeration yet to come
In November 2023, an initial target of USD 2,535 was set based on the inverted head and shoulders formation. Although the path was challenging, gold prices nearly reached this target with a new all-time high at USD 2,531. The breakout above the upper Bollinger Band on the weekly chart suggests further upward potential, supported by the stochastic oscillator.
The weekly chart indicates a bullish trend, with potential for higher gold prices in the coming weeks, despite negative divergences. The rally that began in October 2023 has not yet experienced an overshooting finale, indicating significant upward potential.
Daily chart: Stochastic oscillator bullishly embedded
The daily chart shows a bullish trend, with the stochastic oscillator supporting the uptrend. The next price targets are at USD 2,535, USD 2,550, and USD 2,560. A possible exaggeration could temporarily push gold towards USD 2,700.
Commitments of Traders for Gold – Bearish
Commercial traders hold a cumulative short position of 292,502 gold futures contracts, indicating a bearish sentiment in the market. The current positioning of professional actors remains unhealthy, with a high need for hedging, leading to a negative CoT report.
Sentiment for Gold – Too optimistic
The sentiment in the gold market remains optimistic, with an exaggerated level of expectation. While optimists continue to control the market, there is still room for further price increases, potentially attracting more optimists with rising gold prices.
Analysis:
The surge in gold prices to new all-time highs is driven by strong investor confidence, geopolitical tensions, and expectations of interest rate cuts. Technical analysis suggests potential for further price increases, with the possibility of a temporary push towards USD 2,700. However, bearish sentiment in the CoT report and overly optimistic market sentiment indicate caution in the gold market. Investors should closely monitor price movements and market dynamics to make informed decisions about their investments.
Gold prices are currently experiencing a summer rally, expected to continue until the end of August. However, a rough patch is forecasted for September, with historical data showing a significant drop in prices. This may present a buying opportunity towards the end of September or early October.
On the macro front, Chinese gold premiums have hit their lowest level since early 2020, trading at a discount of USD 27.2 below the LBMA benchmark. Despite this, investment demand for gold remains strong, especially with rising global interest in the precious metal.
Gold has outperformed all fiat currencies in the long term, showcasing its role as a store of value and inflation hedge. With concerns about ongoing devaluation of fiat currencies, gold remains a reliable investment option.
Although gold prices are soaring, many gold mining stocks have not yet reached their all-time highs. Companies like Agnico Eagle and Alamos Gold have outperformed the sector and shown significant growth.
Additionally, Gold Fields’ acquisition of Osisko Mining for CAD 2.16 billion highlights the strengthening of reserves in the gold mining sector. This strategic move is expected to boost production and generate further interest in the industry.
Overall, the rally in the gold market is likely to continue, making it a favorable investment option in times of economic uncertainty and political crises. Gold Market Analysis: Price Surge Imminent Despite Potential Setbacks
As the world’s top investment manager and financial market journalist, it’s crucial to understand the current dynamics of the gold market. Despite two interim sideways consolidations, a significant market correction with a price drop of over 10% has not yet materialized.
According to Tradingview, the gold market faces challenges despite positive price development and strong supportive macro and fundamental conditions. With a gain of nearly 40% since October 2023, the gold price is currently overbought. On the other hand, the US dollar is oversold and has entered a broad support zone after a recent decline.
The Commitment of Traders (CoT) data is negative, and sentiment levels show dangerously high levels of optimism. Despite these factors, the breakout above USD 2,500 suggests that the sideways movement since mid-April has ended, indicating a potential sharp price increase.
Looking ahead to September, a strong correction in the stock market and a US dollar recovery could temporarily impact gold prices. However, a zone between USD 2,430 and USD 2,485 is expected to absorb any pullbacks initially, with a “worst-case” scenario around USD 2,400. Despite short-term fluctuations, gold is forecasted to continue on a broader path towards USD 2,700 to USD 3,000.
In the short term, monitoring the stochastic oscillator on the daily chart is recommended. If both lines remain above 80 by Friday evening, the bullish embedded status is likely to continue, leading to further price increases. However, a reversal of this setting could indicate a short-term top at USD 2,531.
Overall, investors should stay vigilant and monitor market conditions closely to capitalize on potential opportunities in the gold market. Stay informed, stay strategic, and make informed decisions to navigate the dynamic world of investments successfully.