From mid-August to October 20, gold prices gained 32% and reached historic highs at $4,380 per ounce. The sharp rise created overbought conditions and by October 29, prices had dropped 11% to $3,900. Over the past two days, the decline has stopped, prices are holding above $ 4,000, writes Alfa Investor.
The correction was triggered by profit taking before several important events:
- the meeting between Donald Trump and Xi Jinping
- the decision of the US Federal Reserve on the rate
- publication of US inflation data in September
The meeting between Trump and Xi Jinping on October 30, which was expected to normalize relations between the United States and China, was positive, but gave only temporary results and hope for continued negotiations. Key issues remained unresolved.
On October 29, the US Federal Reserve lowered the rate by 0.25%, to 3.75-4.0%, but there was uncertainty about the decline in December. Fed Chairman Jerome Powell noted the risks for further rate cuts, as most of the macro statistics have not been published since early October due to the shutdown of government funding.
Due to the shutdown, September inflation data was published 10 days later than the schedule - on October 24. Key inflation, which does not include energy and food prices, came out slightly better than expected: 3.0% year-on-year versus expectations of 3.1%. Inflation still remains well above the Fed's 2% target, but positive dynamics increases the likelihood of a rate cut.
WHAT'S NEXT For gold, periods of long consolidation are typical. For example, after rising by 30% in 2020 during the Covid-19 pandemic, prices adjusted to $1,650 per ounce and remained in the range of $1,650-$2,000 until February 2024. The rally that began in February 2024 is also characterized by periods when gold is trading in a narrow range without a pronounced trend for 3-6 months. If this pattern continues, prices are likely to remain at the current level until the end of this year.
finally
● Since October 20, gold prices have been declining by 11%, to $3,900, amid profit-taking ahead of the Trump-Xi Jinping meeting and the Fed's rate decision. The decline has stopped, and so far prices are holding around $4,000 per ounce.
● Due to the correction, gold is no longer as overbought as it was in mid-October. Local drawdowns are not excluded, but the trend remains growing.
● The key fundamental drivers of growth — purchases by investors and central banks — remain. In the third quarter, due to these factors, the demand for gold reached a record 1,313.1 tons.
● Despite record prices, the inflow of funds into ETFs continued in October, indicating continued strong investment demand.
● They are still being saved
