The gold market is on track to close the week with a new all-time high, although short-term corrections are possible. Despite these risks, some analysts believe this rally could mark the beginning of a more extensive upward trend.
Both gold and silver have surged following a brief period of consolidation. Gold prices, previously capped at just under $2,550 an ounce through August, have now breached this resistance. December gold futures are currently trading at $2,606.90 per ounce, reflecting a 3.2% increase from last Friday.
Silver has experienced an even more remarkable rise, with prices climbing above $31 per ounce. December silver futures last traded at $31.13 an ounce, up nearly 10.5% from the previous week.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, described the rally as a “coiled spring” that has finally released its potential. Hansen attributed this movement to supportive economic data that suggests lower interest rates not only from the Federal Reserve but also globally.
Falling global real yields due to central banks’ rate cuts are providing strong tailwinds for both gold and silver. Hansen also noted that silver’s breakout is contributing to gold’s performance.
Colin Cieszynski, Portfolio Manager and Chief Market Strategist at SIA Wealth Management, anticipates higher gold prices in the coming months but warned of potential volatility next week. “We are at the beginning of a global easing cycle, which could drive gold higher against all major currencies,” he said. Cieszynski, however, is cautious about pursuing this breakout until there is more clarity on the Federal Reserve’s upcoming monetary policy decision.
Markets currently assign a 43% probability to a 50-basis point rate cut by the Fed next week. Cieszynski pointed out that if the Fed opts for a smaller 25-basis point reduction, gold prices might face some selling pressure. Economists have described the Fed’s forthcoming decision as a “coin flip.”
Phillip Strieble, Chief Market Strategist at Blue Line Futures, expects some downward pressure on gold and silver next week, citing over-optimism about aggressive Fed rate cuts. “I don’t see how the Federal Reserve could justify a 50-basis point cut at this moment without depleting its resources,” Strieble said.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, foresees significant volatility next week. “If the Fed adopts a dovish stance, gold could soar as markets anticipate further cuts. Conversely, a hawkish surprise could lead to a sharp decline in gold prices,” Aslam warned. “Expect a rollercoaster ride—buckle up and stay vigilant!”
Next week’s focus will not only be on the Federal Reserve’s decision but also on other key economic indicators, including regional manufacturing data, housing market figures, and retail sales numbers. Additionally, the Bank of England and the Bank of Japan will announce their monetary policy decisions, potentially adding further market volatility.
