Gold (XAU) Price Forecast: New Record Highs as $2,700 Level in Sight, Fed in Focus

Gold Prices Hit Record Highs, Eyes on Fed for Future Cuts

Gold prices soared to a fresh record high on Thursday, pushing toward the key $2,700 level. This marks a significant milestone as the precious metal pulls further away from its steeply rising 50-day moving average. While gold’s strong upward momentum suggests more gains ahead, it may also signal heightened volatility as it moves into uncharted territory.

At 11:21 GMT, XAU/USD is trading $2678.22, up $21.22 or +0.80%.

Rate Cut Expectations Fuel Gold Rally

Gold’s rally has been largely driven by growing speculation that the U.S. Federal Reserve will implement further rate cuts before the year’s end. Traders are particularly focused on Fed Chair Jerome Powell’s upcoming speech for hints on the central bank’s next moves. Powell’s comments will follow a recent 50 basis point cut, which brought the Fed’s benchmark rate to 4.75%-5.00%. According to the CME FedWatch Tool, there is now a 62% probability of another 50 bps rate cut in November.

Lower interest rates traditionally benefit gold, as they reduce the opportunity cost of holding non-yielding assets like bullion. “Gold price strength is feeding on itself right now, driven by momentum and speculative flows despite a rising U.S. dollar and Treasury yields,” said independent analyst Ross Norman.

Key Data Releases May Influence Market Sentiment

In addition to Powell’s remarks, investors will also keep a close eye on critical U.S. economic data due this week. On Thursday, weekly jobless claims and durable goods orders will provide fresh insights into the state of the U.S. economy. Meanwhile, Friday’s release of the core personal consumption expenditures (PCE) index—the Fed’s preferred inflation measure—will be another key indicator for market participants, potentially impacting gold’s short-term trend.

Gold Poised for New Highs Despite Potential Year-End Profit-Taking

Gold has surged by more than 29% in 2024, driven by ongoing rate cuts, safe-haven demand due to geopolitical tensions, and strong central bank buying. Analysts at Intesa Sanpaolo foresee further gains in the coming months, predicting gold could reach as high as $3,000 per ounce. However, they caution that some profit-taking is likely as the year draws to a close. “We forecast a 4Q24 average price of $2,595,” they said, hinting at a potential pullback later in the year.

Market Forecast: Bullish in the Short-Term

Given the strong momentum in gold prices, bolstered by dovish Fed expectations and ongoing geopolitical uncertainty, the outlook remains bullish in the near term. With potential further rate cuts on the horizon, gold is likely to continue its upward trend, though volatility could increase as it approaches new all-time highs. Traders should keep a close watch on upcoming Fed commentary and inflation data to gauge the metal’s future movements.