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MENAFN- Daily Forex)
Gold futures hit another record high in daily trading, settling above $2,720 per ounce and adding to their impressive rally in 2024. According to gold trading platforms, the yellow metal continues to achieve all-time highs even as the US dollar and Treasury yields rise.
Do financial markets expect $2,800 per ounce by the end of the year? Gold futures advanced to $2,733.80 per ounce on Friday. As a result, gold prices moved to achieve a weekly gain of about 2.2%, adding to their annual rise of 32%. In the same performance, silver prices, gold's sister commodity, surpassed the $33 per ounce barrier. Silver futures had risen to $33,285 per ounce. Overall, the price of the white metal rose by 5% this week and rose by 39% so far this year are the reasons for the rise in gold prices to historical record levels?
Market watchers attribute various reasons to the huge rise witnessed by precious metals at the end of the week. Geopolitical tensions were one of the main reasons behind the rise. Investors rushed to buy gold due to fears of a wider war in the Middle East, especially now that Israel has killed several leaders of Hamas and Hezbollah. Both Israel and those organizations have repeatedly vowed to continue fighting. Expectations of a more flexible US Federal Reserve policy also fuelled the rapid rise in gold. While the futures market expects a less aggressive central bank, traders are pricing in a weaker US interest rate environment, including another 50-basis point rate cut in November.
Although the US dollar and government bond yields have strengthened over the past month, they took a breather on Friday. The US dollar index (DX), a measure of the US dollar against a basket of other major currencies, fell 0.32% to 103.49, from an opening of 103.81. Overall, the index rose 0.6% during the week's trading and has risen 2.1% since the beginning of the year.
As is well known, a weaker US dollar is good for dollar-denominated commodities because it makes them cheaper for foreign investors to buy them.
At the same time, US Treasury yields were generally in the red, with the 10-year yield falling 2.1 basis points to 4.075%. As is well known, gold is sensitive to interest rate movements because they affect the alternative cost of holding non-yielding bullion.
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Overall, the fundamentals remain strong for the gold price index, with market analysts saying there will be little reason to stop its rise outside of profit-taking bouts. Regarding the outlook, Max Layton, head of global commodities research at Citi, told CNBC that gold could reach $3,000 an ounce in the next six to 12 months. Last week alone, bullion prices gained more than 2%, while US gold futures rose 0.7% to settle at $2,725 prices rise on rising geopolitical tensions
Analysts attribute the bullish momentum in gold to rising geopolitical tensions that are pushing investors towards safe-haven assets. In this regard, Ronna O'Connell, an analyst at StoneX, told Reuters news agency:“Markets continue to look at geopolitics, and the developments that occurred overnight in the Middle East are fueling uncertainty.”
The rise in gold prices reflects a strong bias among traders, especially from Asian markets. For his part, independent analyst Ross Norman told Reuters:“The breakout of gold prices above the psychologically important $2,700 level during Asian trading hours indicates that speculative interest has peaked.”
Gold is trading strongly, seemingly unfazed by factors such as low inflation and Treasury yields interest rate cuts from major central banks
With a notable increase of over 31% this year, gold prices are largely being driven by the prospect of further easing measures by major global central banks, including the US Federal Reserve, coupled with ongoing geopolitical tensions. In the physical market, traders in India reported offering discounts due to weak demand, which has been hit by record high prices, especially ahead of a major festival.
As such, market analysts suggest that gold could face resistance around the $2,750 mark if it continues its upward trajectory.
Also, Western investors have helped push prices higher, having largely remained on the sidelines in the first half of the year as Asian demand surged. The U.S. central bank's shift to looser monetary policy has boosted the appeal of bullion-backed ETFs, with holdings on track for a fifth monthly expansion in October - the longest stretch of inflows since 2020.
For many in the industry, the outlook from here is more bullish. Traders, refiners and miners attending the Bullion Market Association's annual meeting in London this week were expecting a rise in prices are set to hit about $2,917 an ounce by late October 2025, according to the median forecast from a poll of delegates. Silver prices will gain more than 40% next year to $45 an ounce, the poll said.
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