Gold continues to rise as expectations of rate cuts grow

Investors continue to be optimistic that the Federal Reserve will begin a series of rate cuts throughout 2024. The real question is not if the Fed will cut rates next year, but when they will begin and how deep the interest rate cuts will be. Analysts are split as to when the Federal Reserve will implement its first rate cut next year. Although they are split, the consensus continues to favor rate cuts during the second quarter of 2024. This differs from investor optimism, which hopes to see the first cut initiated in March of next year. 

The recent rise in gold pricing results from a combination of factors. Bullish sentiment has gained steam as more investors anticipate rate cuts early next year. The geopolitical climate continues to be worrisome, with conflicts in both Ukraine and the Middle East showing no signs of easing. Conflicts in both parts of the world continue to be a prominent factor in gold’s haven allure.

Gold continues to rise now for the third consecutive day. As of 4:28 PM EST, gold futures basis the most active February contract is currently fixed at $2079.10. Today’s gains are occurring with typical light holiday volume, today gold futures have had a volume of 75.571K. A tremendous difference from the largest volume this month. The largest volume this month occurred on December 4 with a daily volume of 378,224k contracts.

Dollar weakness contributed to today’s gains with the dollar currently down 0.27% taking the dollar index to 101.451. The dollar index traded to its highest value in 2023when on Tuesday, October 3 the dollar index breached 107.

Next year may hold on to the optimism of rate cuts in early 2024 coupled with the existing geopolitical tensions in the Middle East and Ukraine.  We then can expect to see gold hold its major support at $2000 with minor support at $2040 per ounce.

Wishing you as always good trading,