Gold Price Surges to New High, Targets 2,661 and Beyond

Gold price soared above the $2,600 level on Friday for the first time, extending a rally boosted by bets for further US interest rate cuts, and rising tensions in the Middle East.

Spot gold was up 1.3% at $2,620.63 per ounce by 1:43 p.m. ET (1743 GMT), while US gold futures settled 1.2% higher to $2,646.20.

Factors that affect gold prices

1. Fed’s rate cut decision
Gold’s reaction to the Federal Reserve’s 50-basis-point cut and its signal for 200 basis points of easing over the next two years was tempered by comments from Fed Chair Jerome Powell. Powell said the central bank is not in a hurry to ease interest rates and noted that the Fed is now in the process of “recalibrating” its monetary policy.

2. Tensions in the Middle East
Prices of the safe-haven asset have climbed 27% in 2024, their biggest annual rise since 2010, as investors also sought to hedge uncertainties spurred by prolonged conflicts in the Middle East and elsewhere.

“Geopolitical risks, such as ongoing conflicts in Gaza, Ukraine, and elsewhere, will ensure to sustain gold’s safe-haven demand,” Forex.com analyst Fawad Razaqzada said in a note.

3. Continued weakness in the dollar

Continued weakness in the dollar, which makes gold cheaper for holders of other currencies, offered additional tailwinds, analysts said. A weak dollar typically supports higher spot gold prices. When the dollar loses value, gold becomes cheaper for foreign buyers, increasing demand. A weak dollar often signals economic uncertainty or inflationary pressures, which further drives investors to seek refuge in gold as a stable asset.

Acceleration in Momentum

Today's move into new record highs indicates a strong acceleration in upward momentum for gold, distancing itself further from the 20-Day Moving Average (MA, in purple). This is also evident in the steeper slope of the internal uptrend line, which has recently converged with the 20-Day line. Looking at the broader picture, a higher target for gold emerges around 2,724, reflecting a 447-point increase or 22.5% since the February swing low. The next upswing, measured from the swing lows on June 26, aligns with this target of 2,724.

“From a technical point of view, the area of attraction for the price seems to be $2,640, which is the 161.8% level from the initial upward momentum in August 2018 to the peak in August 2020. This was followed by two years of trading in a wide range, with the deepest decline in September-October 2022, which set the stage for a new advance,” said Alex Kuptsikevich, Senior Market Analyst at FxPro. “If gold continues to follow its two-year cycles, the upside momentum could soon be replaced by a sideways or sharp reversal like we saw in 2011. The accumulated overbought conditions in gold do not imply an immediate reversal. On the contrary, the most violent part of the rally, with a massive short squeeze, may still be ahead. However, traders should also be on the lookout for signs of growth exhaustion, which could follow a very sharp correction.”

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