Gold Bullish Momentum Signals Further Price Increases
Gold is surging higher after the Federal Reserve’s shifting monetary policy and the prospect of lower interest rates. Investors anticipate that the Federal Funds rate could decline significantly, lowering real yields on U.S. Treasury bonds. Additionally, a weaker U.S. dollar, which accompanies lower interest rates, will make gold cheaper for foreign buyers, further driving demand. Moreover, the ongoing geopolitical crisis is further impacting the gold market. This scenario has increased the gold bullish momentum and created upward pressure in gold prices.
Investor demand for gold remains strong, further supporting a bullish outlook. Despite strong market volatility, investor confidence in gold quickly rebounded, increasing futures positions and gold-backed ETF inflows. Gold’s role as a hedge against uncertainty continues to drive strong demand. Furthermore, rising extraction costs and constrained production are likely to limit the supply of gold, pushing prices even higher. This combination of robust investor demand, favourable macroeconomic conditions, and supply-side challenges make the long-term outlook for gold increasingly bullish.
Gold Price Compression and Bullish Momentum
The technical outlook for the gold market is strongly bullish, as seen in the weekly chart below. The inverted head and shoulders pattern has been broken, initiating a higher surge. The seasonal correction from April to May was expected, and these consolidations occurred within the rising channel. A breakout from these consolidations has pushed gold prices above $2,600. The weekly chart suggests that prices are likely to continue increasing, with the green arrow indicating a key buying opportunity in the gold market.
Following the breakout from the inverted head and shoulders pattern, the rising channel signals price compression, and a breakout above this could lead to a solid upward move.
Since the gold market entered the geopolitical crisis, volatility will likely increase. Therefore, investors may consider buying during dips and holding positions longer as the price rises. The chart below shows all the Swing trade entries taken in 2024. However, the day trades on WhatsApp are also showing positive results.
Bottom Line
In conclusion, the gold market is positioned for continued bullish momentum driven by favourable macroeconomic conditions, geopolitical tensions, and strong technical patterns. The Federal Reserve’s shift toward lower interest rates and a weakening U.S. dollar support investor demand, while geopolitical crises fuel gold’s safe-haven appeal. The rising extraction costs and constrained production are likely to limit supply, pushing prices higher. Technically, gold has broken key resistance levels and is expected to continue its upward trajectory, presenting buying opportunities for investors willing to hold positions through periods of volatility.
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