Gold prices are poised to deliver their biggest quarterly gain in over eight years, as the precious metal continues to benefit from global uncertainties and dovish monetary policies. Although gold eased slightly from its recent record high on Monday, it remains up 14% this quarter, marking its best performance since January 2016. The ongoing conflict in the Middle East, combined with U.S. Federal Reserve interest rate cuts and China's economic stimulus measures, has created the perfect storm for bullion to rise as a safe-haven asset.
As of Monday, spot gold was down 0.6%, trading at $2,641.50 per ounce, while U.S. gold futures dipped by 0.2% to $2,663.50. Despite this minor pullback, analysts remain bullish on gold's outlook, with UBS analyst Giovanni Staunovo predicting that gold could reach $2,900 per ounce over the next 12 months. Staunovo cited weaker U.S. economic data as a key factor, which should allow the Federal Reserve to continue cutting rates, providing further support for gold prices.
Gold's recent rally has been driven by a combination of global factors. The Federal Reserve's decision to cut interest rates by half a percentage point, China's aggressive stimulus policies, and the intensification of conflicts in the Middle East have all contributed to its rise. Investors continue to turn to gold as a hedge against volatility and geopolitical risks, particularly with the escalation of military action in the Middle East involving Israel, Hezbollah, and the Houthis in Yemen.
"Geopolitical tensions and dovish signals from the Federal Reserve are keeping gold supported, even as risk sentiment rises in equity markets," said Ross Norman, an independent market analyst. However, recent strength in Chinese stocks, which saw their biggest one-day gain in 16 years on Monday, could cause some profit-taking on the fringes of the gold market as investors look to balance risk and reward.
China's economic recovery, fueled by large-scale stimulus efforts, has boosted risk appetite among global investors, leading to some selling pressure on gold. The People's Bank of China (PBOC) introduced sweeping measures, including instructions to banks to lower mortgage rates on existing home loans and fiscal policies to revive its ailing economy. These developments have drawn some capital away from safe-haven assets like gold and into riskier assets, such as Chinese equities, which posted a historic rally on Monday.
Despite these fluctuations, gold remains supported by concerns over the Federal Reserve's future policy direction. The central bank's dovish stance, with expectations of additional rate cuts, has weakened the U.S. dollar, further supporting gold prices. Market participants are now closely watching upcoming U.S. economic data, including ADP employment statistics and non-farm payrolls, as well as speeches by Fed Chair Jerome Powell and Governor Michelle Bowman for insights into the Fed's next steps.
Meanwhile, other precious metals have also been experiencing significant moves. Spot silver, which surged to a 12-year high last Thursday, was down 1.1% at $31.29 per ounce on Monday but is set to post an 8% gain for the quarter, marking its fourth consecutive quarterly rise. Carlo Alberto De Casa, a market analyst at Kinesis Money, noted that silver's uptrend could continue if global monetary policies remain loose.
Platinum also shed 1.8% to $982.50 per ounce, while palladium declined by 0.8% to $1,002.25, though both metals are on track for quarterly gains. Analysts have pointed out that gold's overall momentum remains strong, with its rise in recent weeks supported by a short-term ascending trend. However, some caution that the Relative Strength Index (RSI) on gold's daily chart indicates the metal may be nearing overbought territory, which could lead to some consolidation or profit-taking in the near term.
Technically, resistance levels for gold include the recent all-time high of $2,685-$2,686 and the psychologically significant $2,700 mark. On the downside, gold has support at $2,600, with additional backing at $2,560 and $2,530.
As investors await further direction from Fed Chair Jerome Powell's upcoming speech, there is an air of anticipation in the markets. Powell's comments are expected to provide crucial insights into the central bank's policy outlook, particularly regarding interest rates. Any further indication of easing monetary policy could set the stage for another surge in gold prices.
