Spot gold surged more than 1%, approaching $2,595 an ounce at one point. Analysts pointed out that the dollar resumed its decline after the Fed's decision, and the geopolitical tensions boosted gold prices. Heavyweight news came from the ceasefire negotiations in the Middle East. The latest report from the Wall Street Journal said that US officials admitted that Biden could not achieve a ceasefire in Gaza.
Spot gold closed up $27.31, or 1.07%, at $2,586.49 an ounce on Thursday; the price of gold hit a high of $2,594.90 an ounce during the session.
FXStreet analyst Christian Borjon Valencia pointed out that gold prices rose on Thursday after the Federal Reserve announced a 50 basis point rate cut and entered an easing cycle. Traders ignored the rise in U.S. Treasury yields, and gold prices are still heading towards $2,600 an ounce.
The dollar index closed down 0.3% on Thursday at 100.64; the dollar index hit 101.45 in early Asian trading on Thursday.
The Federal Reserve cut its benchmark policy rate by 50 basis points on Wednesday to 4.75%-5.00%. The Fed expects the benchmark rate to fall another 50 basis points by the end of this year, a full 100 basis points next year, and another 50 basis points in 2026.
Alex Ebkarian, chief operating officer of Allegiance Gold, said: "The market is considering larger and more interest rate cuts because we are in deficit on both fiscal and trade, and this will further weaken the overall value of the dollar."
UBS believes that gold prices can rise further and expects a gold price target of $2,700 per ounce by mid-2025.
UBS said: "Driven by recent risk factors, we expect demand for gold ETFs to accelerate in the coming months."
Tensions in the Middle East, major news on ceasefire talks
"If you combine geopolitical risks with our current deficit, low-yield environment and weak dollar, all of these factors combine to lead to higher gold prices," Ebkarian said.
Gold is seen as a safe haven in times of political and economic uncertainty, and because it does not generate interest, it tends to thrive in a low-interest rate environment.
The Wall Street Journal published an exclusive report on Thursday local time saying that for months, senior U.S. officials have been saying that a ceasefire and hostage release agreement is within reach, but now they privately admit that they do not expect Israel and Hamas to reach an agreement before the end of President Biden's term.
The report pointed out that the Biden administration will not stop seeking an agreement, believing that this is the only way to end the Gaza war and prevent the rapidly escalating conflict between Israel and Hezbollah in Lebanon.
The White House had previously said that the warring parties had agreed to "90%" of the text of the agreement, so it was still full of hope for a breakthrough. But several senior officials from the White House, State Department and Pentagon believe that the warring parties will not agree to the current framework.
An official from an Arab country said shortly after the pager attack on Hezbollah: "There is no chance to achieve this goal now. Everyone is waiting and waiting for the situation after the election. The result will determine what the next government can do."
Failure to reach an agreement will harm Biden's political legacy. According to the Gaza Ministry of Health, the war has killed more than 40,000 Palestinians, most of whom are women and minors.
John Kirby, a spokesman for the US National Security Council, told reporters on Wednesday that although the government has said for months that an agreement is imminent, the prospect of reaching a final agreement is "daunting."
Kirby said: "We are no closer to this goal now than we were a week ago."
According to the latest report from AFP, Lebanese Minister of Public Health Firas Abyad said that the explosions of communication equipment in many places in Lebanon on September 17 and 18 local time have killed 37 people and injured nearly 3,000 people.
After the pager explosion in Lebanon on September 17, walkie-talkie explosions occurred in many places in Lebanon on September 18. After the incident, Hezbollah in Lebanon blamed Israel for the explosion, but Israel has not yet made any public comments on it.
Lebanese Prime Minister Najib Mikati called on countries to take a "firm stand" at the ongoing 79th United Nations General Assembly on September 19 to stop Israel's "aggression" against Lebanon.
Iranian President Pezerhiziyan posted on social media on September 19 that the explosion of Lebanese communication equipment was an act of terrorism. Iran condemned this crime and the criminals would definitely be punished. Hussein Salami, commander of the Iranian Islamic Revolutionary Guard Corps, said on the same day that Israel would face "a strong response from the resistance front."
Hamas issued a statement on September 19 thanking Hezbollah in Lebanon for its support. Hamas said that Hezbollah's firm stance "frustrated Israel's attempt to undermine the resistance movement in the Gaza Strip."
How to trade gold?
Christian Borjon Valencia, an analyst at FXStreet, noted that the upward trend in gold prices remains intact.
Valencia said that momentum favors buyers. The relative strength index (RSI) is moving higher in the bullish zone, but not in the overbought zone. Therefore, the path of least resistance for gold prices is to the upside.
Valencia said that the first resistance level for gold prices is $2,599.96/oz. If it strengthens further, buyers may challenge the psychological levels of $2,650/oz and $2,700/oz.
On the downside, Valencia added that if gold prices fall below the September 13 low of $2,556/oz, the next support level will be $2,550/oz. Once the above levels are lost, the next target will be the August 20 high of $2,531/oz (which has now turned into support), and then the September 6 low of $2,485/oz will be targeted.
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2024-09-20
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