Gold Price Forecast – October 2024

Key Takeaways

• Gold hits yet another all-time high above $2640/toz in September
• More US rate cuts to come – but uncertainties remain
• Despite elevated prices, gold demand appears both strong and broad-based

The Fed Finally Cuts – But Uncertainties Remain

As expected, the Fed finally started the US rate-cutting cycle with a 0.5% reduction on 18 September. While it slightly trimmed its growth and inflation forecasts, they remain confident of a ‘soft landing’ for the US economy and suggest another 0.5% in cuts this year, and 1% in 2025 is appropriate (1).

Markets however are more sceptical and currently believe that more aggressive action is required to underpin growth, and this has helped both the Dollar Index (DXY) and 2-Year US Treasuries yields to 2-year lows (2).

Crucially, the wide (c. 1.5%) dispersion of rate paths n the updated Fed’s ‘dot plot’ graphically illustrates the elevated level of economic uncertainty that lies ahead (1). This combination of falling rates, weaker US dollar and economic uncertainty has propelled gold to a new high of $2640/toz (3).

Investors’ Appetite for Gold Still Solid

The most recent Commitments of Traders (CoT) reports from the CFTC suggests that speculative gold net long futures have now reached the highest levels since the ‘Covid Shock’ in March 2020 (4).

A more detailed analysis reveals that the most recent surge was largely driven by ‘managed money’ – primarily Commodity Trading Advisors acting for retail investors and hedge funds on behalf of high-net-worth individuals. Physical gold ETF/ETC aggregate flows, performance also remained robust, with September likely to see the fifth consecutive month of inflows, with outflows from UK-domiciled funds being more than compensated by inflows into US vehicles (5). In related news, reports out of India suggests that gold jewellery demand – previously an area of relative weakness, is showing signs of recovery, presumably supported by July’s import duty cut and impending gifting season.

Technical Analysis

As suggested in September’s Gold Forecast, the yellow metal finally broke out of its three-week consolidation on 12 September. In doing so, it pushed through the initial upside target of $2543/toz, and confirmed support provided by the ascending 20-day Simple Moving Average then at $2510/toz. Subsequent price action took gold above both the 23.61% and 38.2% Fibonacci Extensions of the 25 July-20 August uptrend at $2572/toz and $2599/toz respectively. Recent trading has seen gold push through the 50% extension level at $2620/toz to the new all-time high above $2640/toz on 24 September.

At time of writing, gold appears to have testing both ascending minor oblique resistance at $2634/toz and the 61.8% Fibonacci extension level at $2641/toz. However, the RSI has now reached overbought levels, though a standard MACD is more supportive. As with the September setup, the fundamentals and technicals still favour an eventual breakout, but a period of consolidation is probably due in the absence of significant fundamental catalysts. 

The gold chart currently presents pivot resistance/support at $2620/toz, minor ascending oblique resistance at $2634/toz and the 61.8% Fibonacci extension level at $2641/toz. The new breakout target is at the 100% Fibonacci extension level of $2710/toz. Support is seen at the 38.2% and 23.61% Fibonacci Extensions of the 25 July-20 August uptrend at $2599/toz and $2573/toz respectively and the ascending 20-day Simple Moving Average, at $2544/toz.

Key Drivers Ahead

Notable events ahead for gold investors include:

• ECB President Lagarde speech and Fed speeches from Chair Powell, Collins, Kugler, Williams, Barr and Kashkari, all on 26 September
• August US Core PCE 27 September
• Fed Chair Powell speech 30 September
• September Eurozone Flash Inflation Rate
• Fed speeches from Bostic, Barkin, Cook and Collins 1 October
• September US ISM Services PMI 3 October
• September US Labour Market Data 4 October
• US FOMC Minutes 9 October
• September US Inflation Data 10 October
• ECB Rate Decision and Press Conference 17 October
• September US Retail Sales 17 October
• Bank of Canada Interest Rate Decision 23 October

Citations

1. www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf 

2. https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2024 

3. https://www.lbma.org.uk/prices-and-data/precious-metal-prices#/table   

4. https://www.cftc.gov/dea/options/other_lof.htm 

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