The gold bulls have been victorious in recent weeks, finally taking the price of the yellow metal above the $2,000 per ounce level on an ongoing basis. Whether the bulls are able to hold the market above this level going forward is another question. They have done a good job thus far, however, and numerous bullish catalysts may keep the price of gold on the rise in the months ahead. The $2,000 level for gold has been tested before, and it failed rather quickly. This time around, the bulls seem to have more behind them helping to drive the price of the metal higher. They will have a tough time letting go of the metal and seeing it sink back below $2,000 per ounce. Any dips in gold may be met with aggressive buying, therefore, and a test of $2,000 could see substantial buying interest enter the market.
“There’s…demand for precious metals. People are realizing there’s inflation. They understand that precious metals are a way to protect their assets against inflation.”– Sr. Precious Metals Advisor Todd Graf
Fed Signals Caution as Inflation Persists at Lower Levels
No new major headlines have hit the market in recent days. Inflation remains lower than it was previously, yet still very problematic. The Fed has held rates at current levels for a while now, and seems to be suggesting that it is in no hurry to raise them further or begin lowering rates. Of course, what the Fed does or does not do will depend on the data stream a great deal. If inflation starts to accelerate again to the upside, the Fed may have no choice but to continue tightening monetary policy. The central bank does appear to be far closer to the end of its tightening campaign than the beginning, and it may simply decide to maintain rates at current levels for longer than previously thought.
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Markets Adapt to Prolonged Low Rates, Gold Bulls Cautiously Optimistic
The markets appear to have accepted and gotten used to the higher for longer scenario. The gold bulls seem fine with rates at current levels as long as the Fed is not planning on much more tightening. If or when the Fed does signal it will begin easing interest rates, look out above. The price of gold could potentially take off on a sharp and steep run higher, possibly well into fresh all-time high territory.
Gold’s Fate Tied to Fed’s Monetary Policy Amid Ongoing Wars
The Fed, inflation and monetary policy are all big factors for the gold market. The two wars currently underway may also play a role in gold’s fortunes in the months ahead. The war in Ukraine between Ukraine and Russia rages on, with little new news to report. There have been discussions about nuclear weapons being used in the battle, however, and that may keep a degree of risk aversion fueling gold higher. The war between Israel and Hamas is also ongoing, although it is currency in a ceasefire state. The ceasefire over the last several days has allowed for the peaceful return of hostages held by both sides. Hopefully, it will act as a stepping stone to a peaceful end to the war. This conflict too, however, could explode into something much bigger if other nations get involved. If Iran were to enter the war, for example, the United States would almost certainly have to become involved as well. With significant firepower already in the region, the U.S, stands by ready to jump in if necessary. This conflict may also fuel some safe-haven buying in gold and keep the price of the metal elevated for the foreseeable future.
👉 Suggested Reading: Central Banks Buying Gold at Record Rates: Why Investors Should Care