Gold prices held steady in mid-October, not far below September’s record highs, but faced resistance from a strong dollar and profit taking.
Gold hovered down 0.11 percent at USD 2,646.43 per ounce on October 15, with upside limited by a U.S. dollar trading at near 2-month highs, and by profit taking. Gold prices have risen by nearly 30 percent so far this year.
Some analysts see potential for more upside in gold prices, perhaps to hit a new all-time high later this year after touching a record high of $2,685.42 per ounce last month.
But moves towards a new peak may be slowed by the strength of the dollar in which gold is denominated, and by the profit taking.
The key elements are in place for further upside in gold: expectations of at least one further U.S. rate cut later this year, and a climate of geopolitical uncertainty due to the wars in Ukraine and the Middle East.
Prices of non-yielding gold can move upwards in a climate of falling interest rates, while geopolitical uncertainty boosts the “safe haven” appeal of bullion.
Fed Governor Christopher Waller has urged “more caution” on rate cuts ahead. Separately, Fed Bank of Minneapolis President Neel Kashkari has said more rate reductions are likely as the Fed’s 2 percent inflation target comes into view.
If bulls fail to push back above the October 11 high of USD 2,661 per ounce and rally above the all-time high of USD 2,685 in the near future, Florian Grummes, managing director of Midas Touch Consulting, quoted by Kitco News, warned: “The breather could play out within the flat downward trend channel in the form of a bullish consolidation flag. In this case, the remaining downside risk would likely be limited to prices between USD 2,590 and USD 2,610.
“In sum, the daily chart is neutral,” Grummes added. “While the stochastic oscillator still indicates more need for correction, Friday’s (October 11) recovery has forced a stalemate. If the potential flag formation persists, the rally could resume soon. Alternatively, the 50-day line would be preferable as the target of the pullback. The daily chart calls for patience.”
For UK gold savers, the pound’s present softness, trading near a one-month low against the dollar, can boost returns in sterling terms from sales of the precious metal.
Analysts see a likely 25-basis points rate cut by the Bank of England in November, but are divided over a possible further rate cut later this year.
The focus will turn now to UK wage growth and inflation data expected later this week, for hints to the future direction of sterling and on the extent of possible rate cuts.
UK mortgage rates have remained stubbornly high, eroding prospects for a return to the very low rates seen before and during the pandemic.
