Gold (XAU) Price Forecast: New Highs as U.S. Election Uncertainty Spurs Rally

Gold Reaches New High on Safe-Haven Demand Amid U.S. Election Uncertainty

Gold reached a record high of $2,789.86 on Wednesday before pulling back slightly, with traders focused on upcoming U.S. economic data, including today’s ADP Employment Change and Advance GDP reports.

This fresh high reflects heightened demand for gold as a safe-haven asset amid political and economic uncertainties, particularly as the U.S. presidential election enters its final days. With polls showing a tight race between Republican former President Donald Trump and Democratic Vice President Kamala Harris, investors are bracing for potential volatility, with gold positioned to benefit from its safe-haven appeal.

At 11:25 GMT, XAU/USD is trading $2781.12, up $6.54 or +0.24%.

Technicals Indicate Market Vulnerability Despite Uptrend

Gold’s technical outlook remains strongly bullish, with the main trend pointing upward as long as prices stay above the swing bottom at $2,708.76. However, the market’s rapid ascent has left it trading well above its 50-day moving average of $2,614.60.

The widening gap between gold’s current price and this moving average increases the likelihood of a potential bearish reversal pattern, as the market becomes more susceptible to pullbacks in the event of a reversal or correction. A close below the 50-day average would likely signal a downward shift, making this a critical level for traders monitoring technical signals.

Fed Rate Cut Speculation and Dollar Weakness Fuel Gains

In addition to political uncertainty, anticipation of a Federal Reserve rate cut has bolstered gold’s appeal. With expectations that the Fed will reduce short-term borrowing costs by 0.25% in response to softening job market data, the prospect of lower interest rates is adding upward pressure on gold. Given gold’s tendency to perform well in low-interest environments, the potential for further rate cuts could sustain support for the metal, especially with the U.S. dollar showing persistent weakness.

Strong Investment Demand Boosts Gold, Offsetting Weak Jewelry Sales

So far in 2024, gold has surged 35%, putting it on track for its best annual performance since 1979. Investment demand remains robust, counterbalancing a decline in jewelry sales, according to the World Gold Council (WGC). Global gold demand, excluding over-the-counter trading, held steady year-over-year at 1,176.5 metric tons in Q3 as higher investment volumes offset weaker jewelry demand. However, the WGC also projects that gold demand in India, traditionally a major consumer of the metal, may fall to a four-year low in 2024 due to economic factors and changing consumer preferences.

Outlook: Bullish Near-Term Bias with Potential for Volatility

Gold’s outlook remains bullish in the near term, supported by election-driven safe-haven demand and expectations of a Fed rate cut, both of which align with gold’s positive performance in uncertain times. Traders should, however, remain cautious of potential volatility due to gold’s elevated level relative to its 50-day moving average. A failure to sustain support above this technical level could lead to corrective price action, but overall, gold prices are likely to continue benefiting from the unique alignment of low-interest rate expectations, dollar softness, and geopolitical uncertainties.