While there is a risk of a short-term pullback in gold prices, some analysts believe this could be the start of a broader rebound.
After a brief period of consolidation, both gold and silver experienced a fresh breakout. As of August, gold prices were capped at just below $2,550 an ounce, but that resistance has now been breached. Silver's gains were even more significant, with prices back above $30 an ounce.
In an interview, Ole Hansen, head of commodity strategy at Saxo Bank, described the rally as a spring that has finally burst, adding that economic data supports lower interest rates, not just from the Federal Reserve but from central banks around the world.
Many analysts note that as central banks around the world lower interest rates, global real yields fall, which will provide an important tailwind for gold and silver.
Hansen also said that gold’s breakout was supported by silver’s breakout.
Colin Cieszynski, portfolio manager and chief market strategist at SIA Wealth Management, expects gold prices to rise further in the coming months. However, he also warned that the market must first deal with this week's volatility.
“This is just the beginning of a global easing cycle and we’re likely to see gold appreciate against all the major currencies,” he said. “I don’t think we’re in a race to the bottom yet, but it’s coming and that will drive gold prices higher.”
However, Cieszynski said he is not ready to chase the breakout this week, explaining that there is still too much uncertainty surrounding the Federal Reserve’s upcoming monetary policy decision.
Cieszynski pointed out that if the Fed chooses to cut interest rates by 25 basis points, there is a possibility that gold prices may face some selling pressure. Economists call the upcoming Fed rate decision a "coin toss."
"One way or another, gold prices will rise in the coming months," he said.
Phillip Strieble, chief market strategist at Blue Line Futures, expects gold and silver to face some selling pressure this week as the market becomes overly optimistic about aggressive Federal Reserve rate cuts.
“I don’t understand how the Fed can justify cutting rates by 50 basis points now and exhaust all its ammunition,” he said.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said investors should expect market volatility this week.
“If the Fed takes a dovish stance, gold could surge as the market starts pricing in further rate cuts. But if the Fed unexpectedly takes a hawkish stance, expect gold to fall sharply. Either way, it’s going to be a roller coaster ride – buckle up and stay alert!” he said.
James Stanley, senior market analyst at Forex, is also bullish on gold, but he does not recommend chasing the market at current levels.
While the Fed decision will be the focus this week, other key economic data could also spark some volatility. Markets will receive regional manufacturing data, housing market data, and retail sales figures.
Following the Federal Reserve's monetary policy meeting, the Bank of England and the Bank of Japan will also announce their respective monetary policy decisions.
The article is forwarded from: Jinshi Data
