By Bhavik Patel
Gold prices hit fresh life time high on Wednesday and although prices have already increased significantly, the structural bull argument for gold is still valid despite the fact that it has decoupled from the interest rate outlook and real yields.
Amidst deteriorating geopolitics, heightened sanctions, and the de-dollarization of the economy, there is a growing desire to purchase gold.
Across all metals, we have the highest conviction on a bullish medium-term forecast for both gold and silver over the course of 2024 and into the first half of 2025, though timing an entry will continue to be critical.
The CME’s FedWatch tool indicates a 98.1% probability of the Federal Reserve initiating interest rate normalization in September. Interest rate futures traders anticipate a 93.5% chance of a quarter-point cut and a 4.6% likelihood of a half-point reduction. Only a 1.9% probability exists for maintaining the current benchmark rate of 5.25% to 5.5%.
This strong belief of a September rate cut, the first since the Fed started implementing its tight monetary policy in March 2022 comes from remarks made recently by Chairman Powell and other Fed officials.
Powell stated at the Economic Club of Washington that throughout the last three months, inflation readings have given rise to greater confidence in the efficacy of their restrictive stance.
These figures indicate that inflation is moving steadily in the direction of the 2% objective, allaying earlier worries that led some authorities to call for stricter measures.
Coming this Friday, July 26, is the July Personal Consumption Expenditures (PCE) price index report, which investors are waiting for. Inflation is predicted to continue to drop in this report, which will give Fed officials important information before the FOMC meeting on July 31.
The rally in Gold is not expected to slow down in near future as traders are anticipating first rate cut in September. We might see periodic profit bookings which will happen time to time as prices are trading near life-time highs.
Momentum oscillator RSI_14 still points to room on higher side as RSI is trading around 66 and not yet have reached overbought zone. In MCX, any dips around 73,700 is good buying opportunity for target of 75,000 and stoploss of 73,000
(About the Author: Bhavik Patel is Sr. Commodity/Currency Research Analyst at TradeBulls Securities)
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