Gold hits $3,831 as markets anticipate more rate cuts

Gold opened the week with some sideways trades but macro factors have been supporting the bullish momentum and by London opening, Gold prices began accumulating upward moves resulting in sharp and strong advance to reach yet another record high $3831 and currently consolidating gains just above $3810

The robust price structure lacks any substantial pullback and further gains to $388o appears to be a strong case considering the broad set of factors lined up in favour.

Fundamental drivers

1. Weakness in Dollar makes Gold attractive as opportunity cost of holding dollar denominated Gold comes down. Also, investor sentiments prefer Gold than dollar, thus increasing Gold demand. Recent gains in Dollar Index paused at 98.60 and current weakness is pushing it to 97.90

2. Fragile Geo political situation keeps safe haven demand for Gold extremely high and record high prices create FOMO among retail investors which boosts Gold demand and Gold prices keep rising in short term as investor psychology prefers Gold as safe bet in the times of geo political uncertainties.

3. Central Banks, mainly China, India, Russia, Türkiye, etc continue to add to their Gold reserves at record pace as global economies begin to shift reliance on Dollar.

4. Rising ETF inflow also keeps structural demand for Gold strong as investors find it relatively safer to invest in Gold ETF.

5. Fed likely to speak dovish tone and it is growingly expected that the Fed may announce at least two more rate cuts by this year, perhaps in October and December. Reduced interest rates will lead to reduced real yields resulting in smart money flow from Bonds to Gold.

6. The likelihood of a temporary Government shutdown in the US creates chaos and sticky inflation shakes investors' confidence increasing economic concerns thereby pressurizing Dollar and boosting Gold demand.

Technical drivers

Gold is in a strong bullish momentum and current strong surge keeps updating new record high prices every now and then. There is no significant price correction or pullback as of now and the metal continues to trade above all major moving averages as well as momentum indicators favouring strong trend continuation that keeps chances valid for further gains to $3880 if bulls succeed turning $3830 into a support with prices closing the day above the zone.

All the same, monthly time frame RSI reading of 89 does call for high caution on heights as these levels may trigger short term profit booking and may witness a sizeable price correction before the next big move.

Broader Outlook: Though the primary trend as well as the current bullish momentum is extremely strong and one sided, the parabolic rise, though fundamentally supported by rising safe haven demand warranting further rise to $3880 and $3950, the rally may be prone to sudden pullbacks and corrections from heights.