Precious metals are starting off 2024 on a positive note amid expectations for a Federal Reserve rate cut.
If inflation continues to slow and economic activity also decelerates, while the yield on Treasury bonds keeps falling and the dollar weakens, then this scenario will be very favorable for gold. In 2024, we could see a strong rise in the price of this yellow metal. According to the CME FedWatch tool, there is an 86% chance of a Fed rate cut as early as March.
Looking at the current rise in gold prices from a December 13 low of $1,982 to a pre-New Year high of over $2,088, the deteriorating liquidity conditions can still raise some doubts about the recent upward movement. However, as the Federal Reserve meeting and spring approach, there are strong arguments that gold will rise even higher.
Gold is now poised for one of two things: either a rally or a significant drop before buyers reload long positions. Given all circumstances, it would be surprising if January were quiet and calm. But there can still be doubts regarding the relatively high gold prices this week.
As for the entirety of January, liquidity issues in the geopolitical and macroeconomic environment should be considered, both of which suggest a continuation of the rise in gold prices with the potential to reach new record highs already in January. The most likely scenario in the current context is a continuation of the upward trajectory with an initial target around $2,100 per ounce.
Recent high demand has established a new historical high in the price zone of $2,150 per ounce.
However, despite the price decline from the new historical high, buyers will be able to permanently overcome the key resistance area, tested several times over the last few years, located near the round figure of $2,100.
From a technical standpoint, gold may retest support at the $2,053 mark.