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11.09.202410:43 Forex Analysis & Reviews: Gold Soars to the Stratosphere

No correction? No problem. Even the slightest dips in gold attract new bulls eager to buy at lower prices. The combination of the Federal Reserve's monetary easing, slowing global economy, uncertainty surrounding the U.S. presidential election, high demand from central banks, and gold's status as a safe-haven asset leaves no doubt about the strength of the upward trend in XAU/USD and the precious metal's ability to set new records.

Rumors of an impending recession are pushing treasury bond yields downward, which in turn is causing global debt yields to fall. The average yield on investment-grade government and corporate debt has dropped to 3.3%, its lowest level since September 2022. The main beneficiary of this process is gold, which pays no interest and easily outperforms bonds when rates fall.

Global Bond Yield Dynamics

Exchange Rates 11.09.2024 analysis

The cooling of the U.S. labor market and economy forces the Fed to begin a monetary easing cycle, which has historically benefited precious metals. In theory, the U.S. dollar weakens under such conditions, providing a tailwind for XAU/USD. However, as events in 2023-2024 have shown, gold can rise even amidst a rally in the USD index. It serves as an alternative to fiat currencies, which are suffering from the synchronization of the Fed's monetary easing with other central banks.

Moreover, central banks, especially in developing countries, favor precious metals as assets immune to third-party countries' influence. In particular, the U.S.'s push to impose the dollar as a reserve currency and means of payment is facing resistance and has triggered a process of de-dollarization. As a result, central banks are likely to maintain a high appetite for gold purchases.

Whether Donald Trump or Kamala Harris comes to power in the U.S., the budget deficit will continue to grow. It stands at a record $35.4 trillion, and there are no signs of it decreasing. Both Republicans and Democrats will push for new fiscal stimulus measures, which will increase the imbalance and heighten default risks. This creates an ideal environment for safe-haven assets like gold.

Exchange Rates 11.09.2024 analysis

Thus, XAU/USD has plenty of reasons to continue its rally. Will the precious metal wait for the August U.S. inflation data, or will it surge to record highs beforehand? In any case, the deflationary process amid a cooling labor market speaks about the slowdown of the U.S. economy, increases the risks of aggressive monetary easing by the Fed, and lights a green light for the analyzed asset.

Technically, the daily gold chart shows a Spike and Ledge pattern. A breakout of the upper boundary of the consolidation range at $2470–2525 per ounce will increase the chances of a sustained rally toward at least $2575 and serve as a signal for purchases.

*Analiza tržišta koja se ovde nalazi namenjena je boljem razumevanju tržišta i ne pruža instrukcije za vršenje trgovanja.

Marek Petkovich,
Analytical expert of InstaSpot
© 2007-2024
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