Why is gold near its all-time high? Should you buy?

Gold is shining particularly bright these days. The precious metal on Monday rose to its all-time high on Monday of $2,146 (Rs 1,78,932) per ounce internationally. Meanwhile, domestically, the gold future contract for February 2024 jumped to a lifetime high of ₹64,000 per 10 grams. On Tuesday morning, the precious metal gave up some of its gains and returned to the $2,100 level (Rs 175,081). But why is gold doing so well? Should you buy it right now? Let’s take a closer look: Why is gold doing so well? A number of factors have gone into gold prices consistently shooting skywards. As per CNBC, the ongoing Israel-Hamas conflict has seen demand for the metal increase. Gold is well known as a safe-haven asset during times of turbulence.

The expectation that the US Fed will cut interest rates is also adding to the bullishness of traders.

Fed Chair Jerome Powell said on Friday said the risks of the Federal Reserve slowing the economy more than necessary have become “more balanced” with those of not moving interest rates high enough to control inflation. Powell reaffirmed the US central bank’s intent to be cautious but also offered fresh optimism on its progress so far. Noting that a key measure of inflation averaged 2.5% over the six months ending in October, near the Fed’s two per cent target, Powell said it was clear that US monetary policy was slowing the economy as expected with a benchmark overnight interest rate “well into restrictive territory.” “We are getting what we wanted to get” out of the economy, Powell said during an event at Spelman College in Atlanta, noting that the “full effects” of the Fed’s 5.25 percentage points of rate hikes to date have likely not yet been felt. “Having come so far so quickly, the (Federal Open Market Committee) is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced,” he said, referring to the central bank’s policy-setting committee. Anuj Gupta, head, commodity and Currency, HDFC Securities told Mint, “Gold prices are climbing in domestic and international market on US Fed rate cut bets. After Jerome Powell’s speech, market is speculating interest rate cut by the US Federal Reserve by March 2024. This is going to put pressure on bond yield and US dollar rates, which is already under pressure for the last one month.” Others, like a report from ICICI Security, say the precious metal is being buoyed by the softness in the treasury yields and the US dollar. The report pointed out that German yields hit a four-month low last week and that the US treasury slid to a two-and-a-half month low on Friday. Should you buy it? Experts seem bullish on the gold’s short-term future. Heng Koon How, head of markets strategy, global economics and markets research at UOB, told CNBC, “The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,”

He predicted gold prices at the end of next year could touch $2,200 (1,83,406) per ounce.

Nicky Shiels, head of metals strategy at MKS PAMP, added, “There is simply less leverage this time around vs 2011 in gold … taking prices through $2,100 and putting $2,200/oz in view.” Gupta told Mint, “Gold rate today has strong support placed at $2,050 per ounce levels whereas it is facing immediate resistance at $2,025 per ounce levels. MCX gold rate today has immediate support placed at ₹62,800 levels whereas it is facing hurdle at ₹64,800 per 10 gm levels. One can maintain buy on dips strategy as overall trend for the precious yellow metal is postive in near term.” Business Insider quoted Fairlead Strategies’ founder Katie Stockton as saying, “Gold closed last week above final resistance from 2020, setting up a breakout pending this Friday’s close above that level. There are signs of upside exhaustion, but a decisive breakout would be a bullish long-term development and should mitigate their effect. An intermediate-term measured move targets ~$2,280 per ounce for gold upon a breakout.” Data last week pointed out to cooling inflationary pressures and a gradually easing labour market reinforcing the notion of an early rate cut. Traders are awaiting Friday’s release of U.S. non-farm payrolls data, which could help further gauge the interest rate outlook. With inputs from agencies