The gold bulls have hit an almost four-month high with an incredible surge of momentum that began earlier in the week but has gathered pace as the days have gone on. During trading on Friday, the precious metal rally had pushed prices up to a level not seen since the summer months. More significantly, now that they have the advantage, the bulls are firmly holding on to those gains, suggesting additional breaks to the upside are on the way.
The revitalised pricing comes as the U.S. dollar index and Treasure Yields begin to slide once again, creating a clear path upwards for gold prices. The impetuous for this acceleration can be traced back to the Federal Reserve, which signalled a dovish pivot earlier this week.
While comments made by Chairman Powell dealt a blow to the greenback, they were warmly welcomed in other quarters after months of punishing rate hikes. Speaking at the Brookings Institution on Wednesday, Powell confirmed what many analysts had already begun to predict; that the time had come for the Feds to loosen the existing hard-line stance on tightening, even while inflation remains elevated. This is a double boost for gold.
With most experts agreeing that smaller rate hikes would favour the bulls, a climb down from the outsized 0.75 points which have characterised this year creates space for prices to increase. Doing so while inflation remains heightened adds further fuel to that fire, as gold traditionally does well in periods of inflation or hyperinflation.
While gold hit a 3.5 month high, with prices up more than £42 ($56) to £1,472 ($1,816) during trading yesterday (Thursday), the U.S. dollar fell by the same margin. The smaller hikes could be adopted within the next few weeks Powell says, at the upcoming pre-Christmas FOMC meeting. If that’s the case, expect another bullish wave prior to the festive period. Buy now to benefit.
