Gold (XAU/USD) is rising after struggling to break through the $2080 level for the past three years. The price of spot gold is creeping close to a new all-time high. As of December 2, 2023, gold is trading at $2,072.22, up 1.76% in the past 24 hours. Analysts believe it could surpass its $2081 high of August 2020.
Why Gold Is Surging
Gold price is set for a third consecutive week of growth, influenced by slowing inflation. Additionally, the growing sentiment that the Fed will announce rate cuts has buoyed the price of gold. US gold futures have closely mirrored the continued rise of spot gold.
According to recent consumer spending data released on November 30, 2023, there has been a moderate rise in consumer spending for October. The data and the smallest annual inflation rise in more than two years have influenced market speculation about rate cuts.
Market analysts speculate the Fed could end its rate hike regime with a possible rate cut. The sentient is strengthened by the modest rise in Treasury yields, which was lower than the highs in the previous month.
Market analysts are eagerly watching the Fed’s next move. The anticipation heightened after Governor Christopher Waller hinted that the Fed was confident in its current policy stance. Consequently, most analysts expect the Fed to hold interest rates at the current level in the December meeting. The focus is now on the interest rate policy for next year.
Gold Price Forecast
Fed Chair Jerome Powell’s upcoming remarks will heavily influence the future price of Gold. While analysts expect policy tightening if inflation heats up, markets are pricing gold based on a hold on rate hikes in the December meeting. Additionally, data from the ECB and rate-cut expectations influence market behavior. It demonstrates how linked the global economy is.
In the short term, gold will retain an upward trajectory. However, Fed Chair Powell’s upcoming remarks could lead to price volatility due to a change in investor sentiment.
Should You Invest in Gold?
The overall market sentiment is that inflation has slowed down. Consequently, analysts are expecting a pause in rate hikes at the upcoming December Fed meeting. They predict that starting in March 2024, the Fed will begin rate cuts, which will continue until around 2026. Based on historical precedent, the new trajectory by the Fed often follows new all-time highs for precious metals within the coming months.
Based on the current market speculation, holding gold right now could lead to a massive payoff in the coming months. However, that will depend on numerous factors, including the Fed’s decision and the performance of the US economy, with a focus on inflation data.
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