Gold (XAU) Price Forecast: Rising Gap from 50-Day Average Signals Correction Risk

Gold Prices Surge as Investors Bet on Further Rate Cuts

Gold prices hit a fresh all-time high on Wednesday, driven by expectations of another aggressive rate cut by the U.S. Federal Reserve and heightened geopolitical tensions.

The precious metal briefly reached $2,639.95 per ounce before retreating slightly, as the broader uptrend remained intact despite growing speculation of a near-term correction. The widening gap between recent highs and the 50-day moving average ($2,367.64) has raised concerns of potential downside pressure.

At 11:48 GMT, XAU/USD is trading $2656.53, down $0.74 or -0.03%.

Gold Gains on Federal Reserve Rate Cut Bets

Gold continues to gain support from investor expectations that the Federal Reserve will further ease monetary policy. Following a 50 basis point rate cut at the last meeting, traders are now pricing in a 58% chance of another half-percentage-point reduction next month. Lower interest rates generally favor gold by reducing the opportunity cost of holding the non-yielding asset. Several market analysts believe gold could easily surpass $2,700 by the end of 2024.

Geopolitical Tensions and Weak Dollar Fuel Demand

Gold has also benefited from geopolitical uncertainty, particularly in the Middle East. Lebanon’s Hezbollah escalated tensions with Israel, further boosting demand for safe-haven assets like gold. Additionally, the U.S. dollar’s weakness and lower Treasury yields have supported higher prices, as highlighted by Daniel Hynes, senior commodities strategist at ANZ. Investors are closely watching Federal Reserve Chair Jerome Powell’s upcoming comments and U.S. inflation data, as these could offer further direction on monetary policy.

ETFs and Central Bank Buying Bolster Gold’s Bullish Outlook

The revival of gold exchange-traded fund (ETF) inflows has been a critical driver in the metal’s recent rally. Global gold ETFs saw inflows of 28.5 tonnes in August, led by North America, reversing several years of net outflows. Analysts at Standard Chartered and Goldman Sachs expect these inflows to accelerate, especially as rate cuts increase gold’s appeal to Western investors. With central banks, particularly in China, also ramping up purchases, demand remains robust.

Market Forecast: Gold Set for Further Gains

Gold’s bullish momentum shows no signs of slowing. The metal has already gained over 27% this year and could reach the $3,000 mark if U.S. economic data deteriorates or geopolitical risks intensify. While a short-term correction may be possible given the current vertical price movement, most major banks forecast a continued rally into 2025, driven by ongoing rate cuts, ETF inflows, and safe-haven demand. Traders should expect gold to remain supported at $2,600, with the potential for a breakout toward $2,850 by 2025.