Gold futures ended Friday at their highest on record, with prices on the cusp if a so-called golden cross — signaling the potential for further upside in the precious metal.
Gold prices surged as the market reacted to the escalating tensions in the Middle East, said Bas Kooijman, CEO and asset manager of DHF Capital, in market commentary. The end of the truce in the region could “continue to fuel risk aversion and investors’ concerns.”
The escalation has “helped extend gold’s uptrend of the last two months as traders take into account changing expectations regarding monetary policy,” he said. “Traders have been betting on an end to the interest rate hiking cycle and possible rate cuts in the first half of next year, which could continue to support gold’s rise over the medium term.”
On Friday, gold for February delivery
GC00,
GCG24,
climbed by $32.50, or 1.6%, to settle at $2,089.70 an ounce on Comex. Prices based on the most-active contracts, settled at an all-time high, surpassing the Aug. 6, 2020 record-high finish of $2,069.40, according to Dow Jones Market Data.
Prices traded as high as $2,095.70 on an intraday basis on Friday, surpassing the previous record intraday high of $2,089.20 from Aug. 7, 2020.
Gold’s rally started after the release of the October consumer-price index, Edmund Moy, senior IRA strategist for U.S. Money Reserve and a former director of the U.S. Mint, told MarketWatch. The data released Nov. 14 showed that the U.S. cost of living was unchanged in October.
The market viewed that reading as saying the Fed has “tamed inflation and is probably finished raising rates and will, in all probability, start reducing rates sooner and faster than previously predicted,” said Moy.
Lower Fed rates mean lower Treasury yields, and since Treasurys are purchased in dollars, falling demand for Treasurys means falling demand for the dollar, he said, which can boost the price for dollar-denominated gold.
“While gold’s current rally is a bit overheated, both the golden cross and the proximity of an all-time high acting like a magnet for the price means that we’re likely to see further gains in the very immediate term,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.
Most-active gold futures on Friday were close to reaching a bullish indicator known as a golden cross, when an asset’s short-term moving average moves above its long-term moving average. The 50-day moving average was at $1,955.44, pennies below the 200-day moving average of $1,955.51 Friday.
Gold prices around the globe had already rallied to fresh record price highs in other currencies and with the U.S. dollar gold price joining the party, “you can expect another wave of buying momentum to come into the market now,” said Peter Spina, president of GoldSeek.com.
““The end of the stealth phase move of the gold bull market is over. It will finally be acknowledged and recognized by the mainstream.””
“I fully expect significantly higher gold prices in the months ahead,” he told MarketWatch. “The end of the stealth phase move of the gold bull market is over. It will finally be acknowledged and recognized by the mainstream.”
Read: Gold rallies toward ‘golden cross’ after defying bearish signal
Spina said it’s important to note that gold prices are “not hitting record highs, but rather the U.S. dollar is hitting record lows against superior money.”
That says the U.S. dollar’s purchasing power is “being eroded even further, more aggressively now,” he said. The ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, is down 0.3% for the year to date after a November pullback.
The precious metal remains supported by Federal Reserve interest-rate cut bets even after Fed Chairman Jerome Powell signaled that it was too soon for the Fed to claim victory over the inflation beast, said Lukman Otunuga, manager, market analysis at FXTM.
Read: Powell won’t endorse market expectations for quick rate cuts
The Fed’s ability to cut interest rates in March is likely to be influenced by key data including CPI and jobs data, among others,” said Otunuga. “Given how the Relative Strength Index (RSI) on the daily charts remains in overbought regions, gold could experience a technical throwback before pushing higher.”
Lundin, meanwhile, also warned that the all-time high for gold may mark a “quadruple top” unless gold is able to decisively break through a new plateau, probably somewhere over $2,100 an ounce.
