October 14, 2024 (Investorideas.com Newswire) Investorideas.com (www.investorideas.com), a go-to platform for big investing ideas releases market commentary from Rania Gule Senior Market Analyst at XS.com.
Gold is witnessing a significant rise and is trading near the $2,653 level today, Monday, amid the geopolitical tensions in the Taiwan Strait, where China conducted military drills in the area, raising international concerns and driving investors to seek refuge in gold as a haven. This tension between China and Taiwan is one of the key factors fueling the current demand for gold, especially as tensions continue to escalate in the Middle East. Historically, this pattern tends to repeat in financial markets, as gold gains additional strength during geopolitical crises, serving as a haven where investors turn in times of uncertainty and risk.
In my view, the recent fiscal stimulus announced by China adds further support to gold prices. China is the largest market for the yellow metal, and any measures to support its economy directly affect global demand for gold. Over the weekend, China’s Finance Minister announced a broad stimulus package aimed at addressing local government debt and providing additional support to the slowing economy. Given this, I believe that demand for gold in China will increase, which could push gold prices to new highs, particularly if the stimulus continues to impact the Chinese economy in the medium term.
I also see that gold (XAU/USD) is approaching a key resistance level at the upper end of its multi-week range between $2,660 and $2,670. This level represents a significant psychological and technical barrier for investors, and breaking through it could signal further gains in the future. This critical resistance is expected to be a pivotal point in determining the direction of gold’s movement in the coming period, especially with increasing geopolitical tensions and various economic policies supporting the market trend.
Additionally, the global trend of lowering interest rates remains another factor supporting gold prices. The European Central Bank is expected to announce a new rate cut at its upcoming October meeting, bolstering expectations of more liquidity in the market and thereby supporting the prices of stable assets like gold. This move is part of the monetary easing cycle adopted by many central banks around the world. In the U.S., economic data also supports expectations of another interest rate cut by the Federal Reserve in November, which will add further pressure on the dollar and support gold.
With inflation rates in the U.S. showing mixed results, as evidenced by the recent Producer Price Index (PPI) data, expectations are now divided between a 25-basis-point rate cut or maintaining current levels. This has led to fluctuations in gold prices. As inflation slows and central banks move toward easing monetary policy, demand for gold as a reserve asset that preserves value amidst market and currency volatility increases.
I believe the markets have responded swiftly to these developments, with the probability of a 25-basis-point rate cut by the Federal Reserve rising to 90%. These expectations reinforce gold’s role as an alternative asset in the face of potential declines in bond yields and bank deposits.
Therefore, I can conclude that gold prices are poised for further gains in the coming period. Several factors, including geopolitical tensions, Chinese fiscal stimulus, and global monetary easing, all create a supportive environment for prices. Fundamentally, if gold manages to break through the key resistance level between $2,660 and $2,670, this could support further gains in the medium term. Despite the economic challenges facing global markets, gold remains the safe choice for investors in times of uncertainty.
I believe gold will continue to rise as global tensions persist. The economic policies adopted in China will be crucial in determining the strength of demand for gold in the global market. While we may see short-term fluctuations in gold price movements, the overall trend points to further gains if current conditions continue.
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