Following a significant 50 basis point rate cut by the US Federal Reserve, gold prices surged last week as the US dollar weakened after the Fed meeting. Spot gold reached a high of $2,625 per troy ounce by Friday’s close, while on the MCX, the gold price settled at ₹74,014 per 10 grams.

Commodity market analysts believe this bullish trend in gold may persist, especially as Fed Chair Jerome Powell and other officials hinted at two additional rate cuts in 2024. They recommend that gold investors buy on significant dips, as the MCX gold price could face resistance at ₹74,500, with some profit-taking expected around that level.

 

Gold Prices Surge 27% After Fed Rate Cut Sugandha Sachdeva, Founder of SS WealthStreet, explained the surge in gold prices following the US Fed meeting, stating, “Gold continues its euphoric rally, reaching new record highs of $2,625 per ounce in international markets by the week’s end.

This increase is primarily driven by the beginning of a monetary easing cycle in the US after four years, highlighted by the Federal Reserve’s substantial half-percentage-point rate cut, which has rekindled gold’s appeal. As US inflation nears the Fed’s 2% target, the central bank has signaled the possibility of another 50 basis point cut by the end of 2024, further boosting gold’s momentum.

Since Q4 2023, gold has been on an upward trajectory, gaining over 27% year-to-date.” She also noted that additional factors contributing to the rise in gold prices include a weakening dollar, escalating tensions in the Middle East, and increased investments in global gold ETFs, particularly from Western countries.

 

Gold Prices Surge 27% After Fed Rate Cut Vaibhav Shah, Fund Manager at Torus Oro PMS, anticipates that the gold rally will persist due to several factors: rising geopolitical tensions could lead to increased investments in safe-haven assets like gold, a deeper rate-cutting cycle is likely to result in lower real interest rates, making gold a more attractive option for asset allocation, and record purchases by central banks will help sustain price momentum.

Meanwhile, Alex Kuptsikevich, Senior Market Analyst at FxPro, advises long-term investors to stay alert for subtle changes. He noted that a decline in government bond yields typically boosts interest in gold as a means of capital preservation.

While this inverse relationship was effective last year, it has faltered this year, particularly when both gold prices and yields began to rise together this week. If this trend continues, it could indicate a shift away from dollar assets, suggesting that gold may be approaching a peak.

 

Gold Prices Surge 27% After Fed Rate Cut According to the FxPro expert, the forced liquidation of short positions could drive gold prices higher, potentially reaching historical peaks, even as the US dollar remains stable against a basket of major currencies and rising bond yields create challenges for gold.

On the other hand, Sugandha Sachdeva from SS WealthStreet recommends a buy-on-dips strategy. She suggests that any corrections in gold prices should be viewed as buying opportunities and that a phased accumulation approach may be wise, as domestic prices are expected to reach new record highs.

Key support levels are identified at ₹72,700 and ₹70,900 per 10 grams. In the upcoming week, market participants will closely watch the US PCE and core PCE index data, the Fed’s preferred inflation metrics, as these could significantly impact gold’s price movement.

 

Sugandha Sachdeva noted that the outlook for gold remains optimistic, although prices might face resistance around ₹74,500 per 10 grams, leading to some profit-taking. In the international markets, gold is expected to encounter significant resistance at the $2,680 per ounce level, while support is identified at $2,540 and $2,470 per ounce.