Throughout 2024, gold prices have soared, breaking previous records, buoyed by a weakening US Dollar and expectations of Federal Reserve rate cuts. The precious metal commenced the year trading at $2,062.94 and has since climbed approximately 13%, reaching new highs.
While pinpointing a singular cause for the gold rally proves challenging, several significant factors have contributed to its upward trajectory this year.
Three Key Drivers Behind Gold’s Rally in 2024:
US Dollar Performance: The US Dollar Index (DXY), gauging the dollar’s strength against a basket of foreign currencies, experienced a slight dip, descending from four-month highs of 105.00 to 104.70. This decline enhanced gold’s appeal to investors holding alternative currencies, facilitating its ascent above $2,270 per ounce.
Expectations of Fed Policy: Investor sentiments regarding the Federal Reserve’s monetary policy have been pivotal in bolstering the gold market. Anticipation of three interest rate cuts by the Fed in 2024 has been a significant driving force. This optimism is partly grounded in February’s core Personal Consumption Expenditure Price Index (PCE) data, the primary inflation metric used by the Fed, which recorded its lowest reading in two years. Such data suggests a potentially more accommodative policy stance by the Fed, fostering investment in gold.
Economic Landscape: Despite robust US economic indicators, including the Manufacturing Purchasing Managers’ Index (PMI) returning to expansion territory and the US economy exhibiting stronger growth compared to other developed economies, gold prices have surged. Investor confidence in the Federal Reserve’s projected interest rate cuts, fueled by recent US inflation data aligning with the Fed’s inflation control targets, has sustained gold’s allure among investors.
Recap of Gold Prices in 2024:
2024 has marked a significant milestone for gold prices, with the precious metal surging to unprecedented levels. In the early months of the year, the price of gold (XAU/USD) surpassed $2,270 per ounce, establishing a new all-time high and surpassing the previous record set on March 21 at $2,223.
As of April 02, 2024, the price stood at $2,259.10 per ounce, indicating a substantial increase from the average closing price of $1,943.00 in 2023. This underscores a robust upward trend in gold prices over the past year.
Technical analysis corroborates the strength of the gold market, with short-to-long-term Exponential Moving Averages (EMAs) and the 14-period Relative Strength Index (RSI) nearing 78.00, signaling strong demand and upside momentum.
