Gold News: Bullish Sentiment as Fed Cuts and Middle East Tensions Lift Prices

Gold Prices Hit Record High on Fed Rate Cuts and Middle East Tensions

Gold prices surged to an all-time high on Tuesday, fueled by a combination of aggressive U.S. Federal Reserve rate cuts, economic stimulus measures in China, and escalating geopolitical tensions in the Middle East. The precious metal reached $2,640.18 an ounce, surpassing Friday’s previous record, as traders sought safe-haven assets amidst uncertainty in financial markets.

At 11:27 GMT, XAU/USD is trading $2630.59, up $1.96 or +0.07%.

Technically speaking, traders shouldn’t complicate this trade. Simply stated, the “trend is your friend”. With traders buying dips, pay attention to the support. The first minor support level is $2593.52, followed by the swing bottom at $2546.86 and the former top at $2531.77. The major support is the 50-day moving average at $2484.73.

Fed’s Rate Cut Drives Gold Higher

The U.S. Federal Reserve’s decision to cut its interest rate by a larger-than-expected 50 basis points last week has been a key driver behind gold’s rally. This cut reduced the opportunity cost of holding non-yielding assets like gold, boosting its appeal among investors.

Chicago Fed President Austan Goolsbee indicated that more rate cuts are likely in the coming year, further supporting gold’s bullish outlook. Lower interest rates traditionally benefit gold, as they diminish returns on competing assets like bonds.

UBS analyst Giovanni Staunovo highlighted the potential for additional rate cuts and China’s economic stimulus efforts as key factors in gold’s rise. He also noted that any short-term price corrections would likely be seen as buying opportunities, as investors who missed out on the rally may increase their exposure to gold.

China’s Stimulus Adds Mixed Signals to Gold Market

China’s central bank announced its largest stimulus package since the pandemic, aiming to pull its economy out of a deflationary slump. While this could boost Chinese bullion demand, it may also redirect investments toward Chinese equities and real estate. The balance between these alternative assets and gold remains a point of consideration for traders, particularly with China’s economic recovery uncertain.

Gold has risen more than 27% in 2024, bolstered by Middle East conflict and central bank demand for safe-haven assets. Ongoing tensions between Israel and Hezbollah have further driven gold’s status as a store of value, with Israeli military actions in Lebanon adding to global concerns over a wider conflict.

Upcoming Economic Data to Influence Gold’s Trend

Traders are now focused on upcoming U.S. economic data, particularly Thursday’s remarks by Fed Chair Jerome Powell and Friday’s Personal Consumption Expenditures (PCE) data. These events are expected to provide clarity on the Fed’s outlook for additional monetary easing, with many market participants predicting further rate cuts if inflation continues to fall.

ActivTrades analyst Ricardo Evangelista noted that if these data releases support the current dovish sentiment, gold could experience further price increases. This follows gold’s 0.5% rise earlier this week, as traders processed the Fed’s latest moves and geopolitical developments.

Gold Market Forecast: Bullish Outlook

The gold market remains firmly in bullish territory, with analysts forecasting continued gains. UBS predicts that gold could reach $2,700 by mid-2025, while Citigroup’s Aakash Doshi believes prices could push toward $3,000 by mid-2025 if current trends hold.

With the Fed expected to maintain an easing bias and Middle East tensions likely to persist, gold’s appeal as a safe-haven asset remains strong. Traders should expect further price strength in the short term, particularly if U.S. economic data continues to support a weaker dollar and additional rate cuts.