The yellow metal soared to new highs as the dollar fell.
The weakening dollar means that commodities in greenback are cheaper to buy overseas, which increases demand.
David Morrison is a senior analyst with Trade Nation and he said, “This shows the gold market’s resilience.”
It found a bottom in mid-December, after briefly falling below $2600. Prices have risen steadily since then. Pullbacks were short and superficial.
Prices have surpassed the old record of $2.790 an ounce, and are likely to rise further.
Gold prices are expected to continue rising until they reach $2,800 an ounce.
The February COMEX gold contract was trading at $2,789.65 an ounce as of the writing. This is up by 0.9% from its previous closing price.
Gold contract hit new record of $2.792.61 an ounce earlier in the day.
Carsten Fritsch is a commodity analyst with Commerzbank AG. He said that despite some concerns, US President Trump had not yet implemented any tariffs, but only threatened.
Trump’s remarks spark gold price surge
Gold prices have increased significantly since recent remarks made by US president Donald Trump.
Analysts attribute this rise in the stock market to Trump’s comments, which increased concerns about economic instability and tensions on a geopolitical level.
Gold has become a popular investment for investors seeking safety in an uncertain world. This is driving its demand, and therefore, price, up.
The recent surge in the price of gold highlights the role that precious metals play as a buffer against political and economic turmoil.
Trump announced on Thursday that he will push for a reduction of interest rates immediately.
Trump stated that “this begins by confronting the chaos in the economy caused by failed policies from the previous administration.”
In the last four years our government has spent $8 trillion on wasteful deficits and imposed crippling regulations and hidden taxes that have never been seen before.
Gold is more attractive to investors because it has a lower interest rate.
Bloomberg reports that Trump also said on Friday that he did not want tariffs to be imposed on China, and that a trade deal with China would have been more beneficial.
It is difficult to predict gold price movements
Expectations of interest rate cuts have increased slightly.
Fed Fund Futures reflect this sentiment, as they are pricing a very high probability that the interest rate will be cut by 25 basis points before the summer.
The market now gives a high probability (around 70%) of a further interest rate reduction by the end the year.
Investors are increasingly preparing for a situation whereby the Federal Reserve will adopt a more accommodating monetary policy in response to changes in economic conditions.
Fritsch stated that “this cannot explain the rising gold price as the US Dollar is still at high levels and the expectations for interest rate reductions are not stronger now than they were at the beginning of the year.”
The 15-ton outflow of the largest gold ETF in the world over the last three days is also not consistent with the current situation.
It is possible the CFTC’s data will give us a few more clues if it shows an increase in speculative long net positions. Fritsch said that the data does not include last week’s trading.
What’s Next?
The gold price continued to rise on Friday, despite Trump’s comments about China.
In a recent report, Filip Lagaart said that it appeared Trump was reversing his earlier statements made during the campaign.
In the event that negotiations do not go as Trump would like, Trump can implement tariffs.
On Friday, gold prices broke the previous record of $2.790 an ounce and are poised to rise even higher.
First, there is the $2.800/ounce price barrier.
Lagaart said, “Some analysts and strategists are penciling in calls of $3,000 but it looks like $2,800 is a good place to start as the next barrier on the upside.”
Morrison, from Trade Nation:
Daily MACD is indicating that the momentum continues to point upwards. However, it’s getting closer to overbought.
Gold prices are also strong at $2.721 an ounce.
The yellow metal, according to global brokerage firms, is expected to reach $3,000 an ounce this year.
Traders are interested in seeing if this rally can gain more momentum and if it will reach the next market peak at $2,800.
This article Gold Prices Reach Record Levels, Targeting $2,800/oz first appeared on The ICD
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