Gold Will Likely Retest Historic Highs Soon

Gold has recently made an attempt to test historic highs but lost momentum and pulled back amid worries about U.S. job market data. The surprising increase in the U.S. Unemployment Rate triggered a strong sell-off in global markets.

While gold is a traditional safe-haven asset, it often finds itself under pressure during market panic. This happens because traders are often forced to sell assets to raise money during sell-offs.

However, such pullbacks in gold markets are quickly bought as forced selling comes to an end and cash-rich investors use the opportunity to purchase gold at attractive prices.

It looks that we have just seen such a scenario. Gold briefly moved below the $2400 level as traders sold almost everything after the release of the disappointing U.S. job market data.

Now that the markets have calmed down, the price of gold has started to move higher as fundamentals did not change. Gold enjoys strong support from central banks, which diversify their assets amid geopolitical tensions.

Investors have also started to shift some funds into gold, betting that central bank demand would ultimately push gold prices above the $2500 level. Meanwhile, the expected start of the rate cut cycle in the U.S. should provide additional support to gold and other precious metals.

It is not surprising to see that the recent pullback was short-lived and gold has quickly managed to gain upside momentum. From the technical point of view, a move above the resistance at $2445 – $2450 range should lead to a retest of historic highs. In this scenario, gold will have a great chance to gain additional momentum and move above the $2500 level as speculative traders will likely buy the breakout of the recent trading range.

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