Technically speaking, traders should not complicate this trade. Simply put, “the trend is on your side.” If traders are buying at the lows, keep an eye on support. The first minor support level is at $2593.52, followed by the swing bottom at $2546.86 and the previous top at $2531.77. Major support is at the 50-day moving average at $2484.73.
Gold prices rise as Fed cuts interest rates
The main driver behind the rise in gold prices has been the Federal Reserve's larger-than-expected 50 basis points interest rate cut last week, which reduced the opportunity cost of holding a non-yielding asset like gold, making it more attractive to investors.
Chicago Fed President Austin Goolsbee has further bolstered gold's bullish outlook by suggesting that more rate cuts are likely next year. Lower interest rates traditionally favor gold because they reduce returns on competing assets like bonds.
UBS analyst Giovanni Staunovo cited the possibility of further interest rate cuts and China's economic stimulus measures as the main drivers of gold prices, adding that any short-term price correction would likely be viewed as a buying opportunity as investors who missed out on the rally could increase their exposure to gold.
China's stimulus measures send mixed signals to gold market
The People's Bank of China announced its largest stimulus package since the pandemic, aimed at pulling the economy out of a deflationary slump. This could boost China's demand for gold, but it could also drive investments into Chinese stocks and real estate. Balancing these alternative assets with gold remains a consideration for traders, especially with China's economic recovery uncertain.
Gold has risen more than 27% in 2024, buoyed by Middle East conflict and central bank demand for the safe-haven asset. Continued tensions between Israel and Hezbollah have further bolstered gold's status as a store of value, while Israeli military action in Lebanon has raised global concerns about a broader conflict.
