Mind A Violent Correction in Gold, As It Keeps Printing New Highs

Gold started the week on a strong note, setting a new high of $2,534.84 as it continues to benefit from its safe-haven appeal amidst global political and economic uncertainty. As well as rising premiums due to geopolitical unrest, physical demand for the precious metal remains solid, however such strong bullish runs are followed by some brutal corrections lower.

Last week, the XAU/USD pair surpassed the $2,600 level, a significant milestone in the ongoing rally. Yesterday, buyers pushed GOLD prices higher as the U.S. dollar weakened following the Federal Reserve’s 50 basis point rate cut. The ongoing speculation about the Fed’s next move has kept markets on edge, with new economic data revealing a slowdown in global business activity, particularly in services and manufacturing sectors. This slowdown suggests that high interest rates are weighing on economic growth, further supporting gold’s rise to new highs.

Gold Chart Daily – The Buying Is Relentless

In yesterday’s Asian session, spot gold saw a brief dip but managed to hold above the critical $2,600 per ounce level reached last week. The metal eventually surged to fresh highs at $2,634.89 during the U.S. session. Gold’s price movement has been fueled by the Federal Reserve’s decision to cut its benchmark interest rate by 50 basis points, a move that capped an already exceptional year for the asset. Rate cuts generally favor non-yielding assets like gold, and with markets anticipating more cuts from the Fed and other central banks in the coming months, demand for gold is expected to remain strong.

Central Bank Gold Buying and Safe-Haven Demand

Strong purchases by central banks and the need for safe-haven assets amid ongoing global conflicts have driven gold prices up by 28% this year. However, after such a steep climb, a significant correction might be on the horizon. Traders may need to consider rebalancing long positions in XAU/USD, as a pullback could be imminent. Despite this, the overall demand for gold remains robust, supported by the weakening global economy and the prospect of further monetary easing from central banks. There is always the risk of a strong retreat before the next bullish leg, which could target $2,600 and even $2,500, but eventually buyers will come back.

Gold Live Chart