Gold Boosted by Low Rates and High Uncertainty

Gold managed to recoup Wednesday’s post-Fed wobble to end the week near another all-time high above $2625/toz. Despite renewed guidance, markets remain convinced that the Fed will need to do more to underpin the US economy.

CME FedWatch suggests that they will cut by a further 0.75% (vs. 0.5% Fed) and 2.0% (vs 1.5% Fed), by the end of 2024 and 2025 respectively. Unsurprisingly, this has seen both the 2-Year US Treasury yield, and the Dollar Index (DXY) fall to 2-year lows, all of which have boosted gold prices. Ongoing geopolitical tensions and economic uncertainty also remain supportive. Gold starts the week trading at $2625/toz.

Despite elevated prices, gold investment demand has remained robust. The most recent CFTC Commitments of Traders (CoT) report suggests that speculative gold net long futures have returned to the ‘Covid Shock’ levels of March 2020. Meanwhile, physical gold ETF/ETC data suggests that continued net inflows over September. Even gold jewellery demand – previously an area of relative weakness – is showing signs of recovery in the key market of India.

Looking to the gold chart, the yellow metal is currently the testing the 61.8% Fibonacci extension level at $2630/toz, but the RSI has now reached overbought levels. Major ascending oblique resistance is present but a sustained move above this level exposes a new breakout target at the 100% Fibonacci extension level of $2698/toz. Support is seen at the 38.2% and 23.61% Fibonacci Extensions of the 25 July-20 August uptrend at $2588/toz and $2562/toz respectively and the ascending 20-day Simple Moving Average, at $2539/toz.

Upcoming events for gold investors include speeches from FOMC members Bostic, Goolsbee and Kashkari on 23 September and a Bank of Japan Governor Ueda speech on 24 September.