Gold Price Forecast – September 2024

Key Takeaways

• Gold hits yet another all-time high above $2531/toz in August
• Both US rates and US Dollar are more supportive, with a September Fed cut now all but certain.
• Gold appears to have entered a consolidation phase, with plenty of support and upside potential.

18 September Should Finally See a Fed Rate Cut

US rates markets eased significantly during August, though not without marked intra-month volatility. An unexpectedly weak US jobs report on 2 August, prompted a rout in risk markets already surprised by the Bank of Japan raising rates on 31 July. While the Fed pushed back on calls for an emergency rate cut, 10-year and 2-year US Treasury yields remain some 20-25bps and 40-45 bps lower respectively (1) and the US Dollar Index (DXY) down c. 3.5% over the month to a 13-month low. All these factors are broadly supportive of precious metals prices and undoubtedly helped gold reach yet another all-time high above $2531/toz on 20 August (2). 

The market’s conviction that a US rate cut is imminent have been given further impetus in recent days by Fed Chairman Powell’s remarks at the Jackson Hole Symposium. Here he unambiguously signalled a shift in the Fed’s risk management priorities, stating ‘The upside risks to inflation have diminished, and the downside risks to employment have increased’, concluding ‘The time has come for policy to adjust’. While this technically falls short of an absolute commitment to cutting rates at the 18 September FOMC, it is hard to imagine the Fed will not move. Indeed, CME FedWatch suggests the futures markets are currently pricing in a zero probability of rates on hold, a 76% probability of 0.25% cut and a 24% probability of a 0.50% cut. Looking to the end of 2024, the market is currently pricing in an average of c. 1% of easing from current levels. (3)

Demand for Gold Remains Solid

Despite gold hitting successive all-time highs, Commitments of Traders (CoT) reports from the CFTC suggest that speculative gold net long futures positions have remained at elevated levels over recent weeks. Indeed, the last published report on 23 August saw net speculative longs at the highest level since March 2020, amid elevated prices. (4) Meanwhile, physical gold ETF/ETC aggregate flows have been more volatile in August, suggesting more price sensitivity among retail investors. Nevertheless, these monthly aggregate flows have also remained positive. (5) Turning to official sector gold demand, the Governor of the National Bank of Poland suggested that they would further increase their holdings of bullion, affirming a positive central bank demand outlook published by the World Gold Council in June. 

Technical Analysis

Having reached successive all-time highs of $2515/toz on 19 August and $2531/toz on 20 August, Gold now appears to have entered a consolidation phase in recent days and has been oscillating around ascending major oblique resistance $2503/toz. Momentum indicators are currently mixed, though on balance breakout appears more probable than breakdown.

To the upside, the completion of the 26 June, 17 July, and 25 July symmetrical triangle suggests an initial upside target of $2543/toz.  Beyond that, we have Fibonacci extension levels indicated at $2566/toz, $2595/toz and $2654/toz. To the downside, we see potential support from a steeply ascending 20-day Simple Moving Average currently at $2459/toz, descending oblique resistance currently at $2455/toz, ascending oblique resistance currently at $2414/toz and an ascending 50-day Simple Moving Average currently at $2407/toz. Ascending minor oblique support is also currently offered at both $2371/toz and $2328/toz and major horizontal support at $2294/toz. 

Key Drivers Ahead

Upcoming events for gold investors include August Eurozone Flash Inflation and July US PCE Inflation 30 August, August US ISM Services PMI 5 September, August US employment data 6 September, August US CPI data 11 September, ECB interest rate decision and press conference 12 September, August US Retail Sales 17 September, US Fed rate decision and press conference and FOMC economic projections 18 September, August Japan inflation rate and Bank of Japan interest rate decision 20 September, August US Durable Goods Orders 26 September.

Citations

1. 1 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2024
2. 2 https://www.lbma.org.uk/prices-and-data/precious-metal-prices#/table 
3. 3 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
4. 4 https://www.cftc.gov/dea/options/other_lof.htm
5. 5 https://www.gold.org/goldhub/data/gold-etfs-holdings-and-flows
6. https://www.trackinsight.com/en/compare-etfs/PHAG,SSLV,OXA6,SLV,SIVR