Gold Near Record Highs: Will Prices Cross $3,000 Per Ounce?

Gold prices are hovering near all-time highs as a weaker U.S. dollar and expectations of interest rate cuts by the Federal Reserve continue to fuel demand for the precious metal. On September 16, 2024, spot gold rose by 0.2%, reaching $2,580.81 per ounce, just shy of Friday's record high of $2,585.99 per ounce. In India, 24-carat gold prices increased to ₹75,690 per 10 grams, reflecting a 2.52% rise over the past week.

The recent surge in gold prices is primarily driven by two factors: the weakening of the U.S. dollar and speculation surrounding the Federal Reserve’s upcoming interest rate decisions. A weaker dollar makes gold more attractive to international investors, as it lowers the cost of purchasing the metal in other currencies. As the dollar index slipped by 0.1% on Monday, demand for gold continued to climb.

Analysts believe that the Federal Reserve's policy meeting this week could further support gold's upward trend. Market participants are betting on a potential interest rate cut, with a 52.9% probability of a 50-basis-point reduction, and a 48% chance of a 25-basis-point cut. Lower interest rates typically benefit gold since it doesn't yield interest, making it more appealing when compared to other interest-bearing assets.

Rahul Kalantri, Vice President of Commodities at Mehta Equities, highlighted the recent price movements, noting that gold futures have broken records and are surpassing $2,600 per ounce. He emphasized that gold's support levels are between $2,550 and $2,562 per ounce, while resistance lies between $2,598 and $2,612 per ounce.

In addition to monetary factors, geopolitical tensions are also playing a crucial role in pushing gold prices higher. Ongoing conflicts in Ukraine heightened tensions in the Middle East, and strained U.S.-China relations have created a sense of uncertainty in global markets, driving investors toward safe-haven assets like gold. Kaynat Chainwala, Associate Vice President of Commodities at Kotak Securities, pointed out that gold's safe-haven demand is likely to persist given these global risks.

With the combination of a dovish Federal Reserve, a weakening dollar, and rising geopolitical concerns, some market experts are optimistic that gold prices could reach as high as $3,000 per ounce in the coming months. Peter McGuire, CEO of XM Australia, expressed his view on CNBC-TV18, stating that gold's global demand, both as a physical asset and as a financial investment, is on the rise. He further noted that he wouldn't be surprised if gold hits $2,700 per ounce by the end of this month.

Investors are closely watching the Federal Reserve's next move, as any signals of further rate cuts could drive gold prices even higher. While short-term corrections may occur, the long-term trend for gold appears favourable. Many experts recommend adopting a "buy on dips" strategy, allowing investors to enter the market during short-term price corrections. This approach could offer profitable opportunities as the broader upward trend in gold prices continues.

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Jateen Trivedi, Vice President of Research at LKP Securities, also suggests this strategy for those looking to invest in gold. According to Trivedi, as long as the Federal Reserve continues signalling rate cuts, gold's support level in India will remain near ₹73,000 per 10 grams, with resistance projected between ₹74,500 and ₹75,000 per 10 grams.

While the path to $3,000 per ounce is still uncertain, the current outlook for gold remains strong. With the combination of favourable monetary policies and ongoing geopolitical risks, gold could continue its rise, providing attractive opportunities for both short-term traders and long-term investors.

[Disclaimer: This article is for informational purposes only and should not be considered as financial or investment advice. Always consult a professional before making any investment decisions. Market conditions and prices may change, and the information provided here is accurate as of the publication date.]