(MENAFN- Daily Forex)
At the end of last week's trading, the price of Gold hit a new record high. The yellow metal was in a state of euphoria and settled above the historical psychological resistance of $2,500 per ounce to trade at an all-time high, supported by geopolitical tensions, global central bank demand, a weaker US dollar, and lower Treasury yields.
Will the price of
gold reach $2,600 next?
Gold futures rose $51.10, or 2.05%, to $2,543.50 per ounce at 14:55 GMT on Friday on the Comex division of the New York Mercantile Exchange. Gold is up 3% on the week, adding to its 23% year-to-date gain. Silver, a sister commodity to gold, also joined the rally on Friday. Silver futures rose $0.522, or 1.85%, to $28.945 an ounce. The white metal has gained 5% this week, taking its year-to-date performance to nearly 21%.
Overall, multiple factors helped gold hit a record high for the 28th settlement so far this year. Market analysts say investors seeking safety were the driving force behind gold's jump. Indeed, geopolitical tensions have been the norm in recent weeks as conflict in the Middle East has left global markets on edge. However, a sharp drop in crude oil prices suggests that a broader conflict in the region is unlikely.
The Federal Reserve is expected to cut interest rates next month, adding to the appeal of gold. Treasury yields have mostly fallen broadly as investors anticipate a rate cut in September. Usually, Gold is sensitive to interest rate moves because they can affect the alternative cost of holding non-yielding bullion.
Meanwhile, the prospect of a rate cut extended the weakness in the U.S. dollar on Friday. The U.S. dollar index (DXY), a measure of the greenback against a basket of major currencies, fell 0.48% to 102.48, from an opening of 102.98. The index had fallen 0.7% last week, erasing most of its gains since the start of the year. So far this year, the U.S. dollar index has gained just 1.1%.
Furthermore, a weaker U.S. dollar is good for dollar-denominated commodities because it makes them cheaper for foreign investors to buy.
Also, Strong demand from central banks has provided additional support for gold prices. Peter Spina of GoldSeek told MarketWatch,“All the ingredients are in place for gold to reach record highs in the coming months.”
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The general trend of gold price is still strongly bullish and breaking the psychological resistance of $2500 per ounce is enough to push all technical indicators towards strong overbought levels. However, considering that the continuation of its gains factors in light of investors abandoning risks, the weakness of the dollar, increasing geopolitical tensions, and further easing of global central banks' policies while increasing their purchases of the metal will ensure some upward movement. Furthermore, if the dollar recovers and geopolitical tensions calm down, gold price may be exposed to profit-taking sales.
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