Gold record highs and Fed cuts

Gold rises to record high before US data that may give Fed clues

Gold touched a record high ahead of US data that may offer clues on whether the Federal Reserve's 50-basis-point rate reduction last week will be the first in a series of aggressive cuts. Bullion rose as much as 0.4% to hit $2,631.13 an ounce (USD), beating the previous all-time high posted Friday.

Traders are weighing the outlook for rates ahead of a batch of crucial economic data — including the US personal consumption expenditures gauge and jobless claims — due later in the week. Fed governor Christopher Waller said on Friday he'd likely back quarter-point cuts at each of the next two central bank policy meetings in November and December, should the economy evolve as he expects. Still, he said another half-percentage-point cut could eventuate if the job market weakens.

Still, there are signs that the rally is overextended. Gold's 14-day relative-strength index was hovering around 70, a threshold that some investors consider as overbought. Hedge funds and speculators have been adding bullish wagers on Comex — with net-long bullion positions hitting the highest in four years, according to the latest Commodity Futures Trading Commission data.

"The bullish momentum is undeniable, but in the near-term, I might be cautious," said Christopher Wong, FX strategist at Oversea-Chinese Banking Corp., adding that bullion may see technical support at around $2,580 an ounce.

Gold is also seeing support from increased haven demand as traders monitored escalating tensions in the Middle East, leading to concerns that the fighting between Hezbollah and Israel could broaden into a wider regional conflict.

Spot gold was up 0.3% to $2,629.14 an ounce as of 1:09 p.m. in Singapore, following a 1.7% gain last week. The Bloomberg Dollar Spot Index was stable. Silver, palladium and platinum all declined.

Conclusion

Traders should remain vigilant and consider several factors when navigating the current gold market. Keep a close eye on upcoming US economic data, monitor Fed statements for potential rate cut clues, and be aware of geopolitical tensions that could impact gold prices.

While the bullish momentum is strong, it's essential to exercise caution and consider technical indicators that may suggest overbought conditions. By staying informed and maintaining a balanced approach, traders can potentially capitalize on gold's record-breaking performance while managing risks effectively.