Gold to set a new record. Forecast as of 28.11.2023

2023.11.28 2023.11.28 Gold to set a new record. Forecast as of 28.11.2023

Dmitri Demidenkohttps://www.litefinance.org/blog/authors/dmitri-demidenko/

The XAUUSD is forecast to reach new peaks as the demand is growing amid the geopolitical and political situation, central banks are showing support and the Fed\'s expected to introduce monetary stimuli. Let’s discuss it and make a trading plan.

Weekly fundamental forecast for gold

In 2020, the gold\'s record rally was fueled by pandemic-related fears and the Fed\'s cheap liquidity. COVID-19 gave rise to much uncertainty, favorable to safe-haven assets, while the Fed\'s aspiration to save the US economy using huge monetary stimuli weakened the greenback and reduced treasury yields. I have a sense of déjà vu at the end of 2023: the central bank is expected to loosen policy while geopolitics pushes investors to safe havens. Will gold update its historical peak, then?

Even if the evolution of many assets, starting with oil and shekel and ending with gold, indicates a de-escalation of the military conflict in the Middle East, the worst is yet to come. The truce will not last forever, while the advance of the Israeli army in Gaza will hardly be as fast as it has been so far.

In any case, geopolitics will remain the focus of investors’ attention. In 2024, we’ll have to deal with politics, too: nearly half the world\'s population will elect presidents. The developments in Mexico, Russia, the US, and elsewhere can shake up financial markets.\xa0

However, the Fed\'s loosening its policy seems to remain the main factor in the XAUUSD\'s rally. The odds of a Fed funds rate cut in 2024 increased drastically upon the publication of US inflation data for October. The derivatives predict a 100-point cut to 4.5%, with the first monetary expansion act scheduled for May.

Market expectations of Fed rates

\xa0 \xa0

Source: Wall Street Journal.

Unsurprisingly, the yield on 10-year treasuries failed to consolidate above 5%, and the US dollar lost more than 3% of its value against major currencies and is about to close November with the worst monthly performance in two years. Gold usually thrives against such a background.

USD dynamics

Source: Bloomberg.

So, bullish sentiment dominates the market. ING forecasts an average price of $2,100 an ounce in Q4 2024. Goldman Sachs\'s estimate is $2,050 throughout the year on average, provided that the Fed drops the funds rate no earlier than October-December. Falling real bond yields and a weakening US dollar will support the precious metal.

If we add to this the increased activity of the People\'s Bank of China, which increased its gold reserves by 181 tonnes to 2,192 tonnes from January to September, as well as the high demand for gold in China, the prospects for the XAUUSD seem bullish.

Weekly trading plan for gold

Nevertheless, gold\'s fate will depend in the short term on whether American inflation continues to slow down and US general macro statistics continue to worsen. The stability of the US economy will be the reason for selling the XAUUSD. But buying will remain valid as long as gold trades above $1,986-1,988 an ounce.

Price chart of XAUUSD in real time mode