Investing.com — Gold Price hit a new record high on Tuesday, extending a recent run of gains sparked by last week’s rate cut by the U.S. Federal Reserve.
Sentiment was also boosted by the prospect of further reductions in borrowing costs later this year. Several Fed officials said Monday they supported cutting the central bank’s interest rates by 50 basis points, but expected the pace of cuts to slow in coming months. Analysts at Citi said they expected declines of at least 125 basis points by the end of the year.
Lower interest rates bode well for gold as they reduce the opportunity cost of investing in non-performing assets.
So far this month, the yellow metal has rallied over 5% so far. The rise was “unusually strong”, defying its historical performance during the month over the past 10 years, according to UBS investors.
In a note to clients, the analysts said that “recent discussions with various market participants” suggest that views towards gold are becoming “increasingly strong”, although they are not yet “fully supported by positions”.
“Many continue to wait for pullbacks to build exposure, but a lack of opportunities has likely fueled these sharp moves to the upside as investors chase prices higher,” UBS analysts said.
They added that traders generally expect a cooling in gold yields “may be on the cards,” particularly if a re-acceleration in U.S. growth leads the Fed to take a “hawkish turn” that could keep interest rates high levels and strengthen the dollar. However, they predicted that any decline would likely be “limited”.
“The market could use a breather,” UBS analysts said. “[A] period of stabilization at this juncture would be healthy for the market, especially if it allows some weak long positions to be washed out and long-term investors get into better levels.”
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Reference;
Kanowsky, S. (2024) Investing.com Poll: Where do you see gold prices by the end of 2024? By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/commodities-news/investingcom-poll-where-do-you-see-gold-prices-by-the-end-of-2024-3629720 (Accessed: 24 September 2024).
