05.03.202412:17 Forex Analysis & Reviews: Gold rally to continue? Gold and oil prices set to increase

The rally in crude oil prices, which began at the end of last week, has stalled, but is there a chance it will resume? What factors are driving gold prices? After reaching a peak in December last year, the highest since the beginning of the century at nearly $2,144.00 per troy ounce, gold prices consolidated in a sideways range until the end of last week and then unexpectedly received strong support. What caused this sharp increase?

In our view, there are two main factors contributing to the rise in gold prices. The first is the anticipation that the Federal Reserve will start cutting interest rates this year. It seems that investors are beginning to realize this amidst all the uncertainty. Fed members, including Chairman Jerome Powell, base their forecasts on incoming economic statistics. The second factor is the increase in geopolitical tension worldwide, fueled by the Ukrainian and Middle Eastern crises, to which the aggressive stance of the US concerning China over the Taiwan issue is added.

Additional reasons include the rising tension within the US due to the intensification of inter-clan political struggle in the presidential race and the increased risk of the American economy sliding into recession. On one hand, it seems odd to discuss this after the publication of strong labor market data in the last two months and decent economic growth last year. However, the latest revised GDP data for the fourth quarter, which showed a decrease from 4.9% to 3.2%, are beginning to concern investors, some of whom have likely decided to hedge risks by buying gold. It can also be assumed that many central banks chose this behavior model, acquiring physical gold.

Will gold prices continue to rise? We believe that the impact of the above factors could push prices to the December 2023 peak if the labor market figures from America and other key economic indicators released this week do not exceed expected values. Also, if Powell describes the state of the national economy as challenging in his Congress speech and indicates that rate cuts could start as early as May or June, this could stimulate demand for gold and push quotes above the December peak.

Overall, there is a total increase in tension in anticipation of the Fed's rate cuts and the complex geopolitical situation, which may continue to support demand for gold for some time before a correction begins.

Forecast:

XAU/USD

Gold may receive support amidst weak statistical data from America and could rise to $2,143.00, but then profit-taking is likely to begin. Against this backdrop, the price may fall to $2,088.80 after breaking through the $2,109.40 mark.

WTI (CL)

US oil quotes found support at the $78.00 level. The price is generally supported by OPEC+ policy and the anticipation of interest rate cuts in America. If the mentioned level holds, the price may rise to $80.40.