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Gold price continues to rise as traders wait for Fed signals

Last updated: 8 Sept 2024
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Gold price continues to rise as traders wait for Fed signals

The price of gold is on an upward trend after hitting a new record high of US$2,531 an ounce on Tuesday, with investors waiting for clues from the Federal Reserve about interest rate cuts at its September meeting.

Gold brokers say buyers are turning to the safe-haven asset in part because of tensions in the Middle East and the Russia-Ukraine conflict.

Tanarat Pasawongse, chief executive of Hua Seng Heng Group, said support factors remain from last week as Fed chair Jerome Powell is scheduled to give a speech at Jackson Hole, at the central bank's annual conference, on Friday about the US economic outlook.

There is an expectation that Mr Powell will announce a plan for reducing interest rates starting from September at the conference, Mr Tanarat said.

Spot gold was up 0.15% to $2,517 per ounce around noon on Wednesday, while US gold futures rose 0.2% to $2,555.20.

The precious metal has gained about $460 or 22% so far this year, with geopolitical tensions and uncertainty created by the upcoming US presidential election and prospective rate cuts set to power gold prices to even loftier heights, he said.

Mr Tanarat said there was a 75% probability the Fed may reduce interest rates by 25 basis points, and a 25% chance the cut would be as much as 50 basis points.

The size of the Fed's interest rate cut may affect the price of gold.

"If the chairman's statement indicates the rate cut will be more than the market expects, it will push the gold price up further," he said.

Meanwhile, the conflicts in the Middle East and Ukraine are getting more heated, with Israel continuing to attack the Gaza Strip, meaning the ceasefire negotiations may fail, said Mr Tanarat.

Hua Seng Heng expects the gold price to have support levels of $2,460 and $2,430 next. Resistance levels are estimated at $2,520 and then $2,540. For domestic prices, support levels are expected at 40,800 and 40,600 baht, with resistance projected at 41,400 and 41,600 baht.

MTS Gold said the gold price could stay above $2,500 after some small profit-taking pressure, causing the price to dip to $2,486 before bouncing back to $2,504 on Monday.

Spot gold soared beyond $2,500 per ounce last Friday, supported by US rate-cut optimism, robust central bank buying and safe-haven demand stemming from the Middle East tensions. The US dollar hovered near a seven-month low, lending support to dollar-denominated gold. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, jumped to the highest level in seven months at 859 tonnes on Monday.

Source: Bangkok Post

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