Against all odds, gold prices have continued their merry run and hit new record highs on Monday.
At the time of writing, the most active December contract on COMEX was at $2,742.40 per ounce, up 0.5% from the previous close.
Earlier in the session, the contract had hit a record high of $2,747.70 per ounce.
“This also marks the seventh day of a positive move in the previous eight and lifts the commodity to a fresh record high, beyond the $2,730 region during the Asian session,” Haresh Menghani, editor at Fxstreet.com, said in a report.
Gold prices have risen despite bearish fundamentals.
The dollar has risen sharply over the last few sessions, while bets of an oversized interest rate cut by the Federal Reserve have also reduced.
The US Federal Reserve is expected to cut interest rates in November by just 25 basis points.
At its September meeting, the Fed had cut rates by 50 bps, surprising the market.
However, hotter inflation in the US and a resilient labor market have now altered the expectations among investors for a larger rate cut in November.
Meanwhile, geopolitical tensions in the Middle East have also eased as the market continues to wait for Israel’s response to Iran’s attack on October 1.
So what’s fueling gold’s rally?
Experts said the momentum in the gold market has helped fuel the price rally over the last few sessions.
According to Carsten Fritsch, commodity analyst at Commerzbank AG, traders are interested in increasing their positions in gold contracts.
“The weekly data on the market positioning of speculative investors, which will be published by the CFTC after the close of trading today, could provide some insight into this,” Fritsch said.
“An increase in speculative net long positions would support this argument,” he said.
Additionally, the uncertainties ahead of the US Presidential election on November 5, continue to underpin the safe-haven appeal for the precious metal.
Fritsch said that if the US Presidential candidate, Donald Trump, returns to the White House, the risk of inflation is likely to increase markedly.
“This risk exists because Trump wants to influence the Fed’s interest rate decisions. The gold price could therefore continue to rise until the US elections if the probability rose that Trump will win,” Fritsch said.
Geopolitical instability
Even though Israel has yet to retaliate against Iran, the ongoing conflict in the Middle East continues to simmer.
The Israeli army launched several strikes across Lebanon and also intensified its attack on Gaza. This threatens to escalate tensions further in the region, with the threat of more countries in the region joining the war.
The instability in the region has raised the safe-haven demand for gold. Prices of the yellow metal could further rise sharply if tensions escalate and gold breaching the $2,800-per-ounce level can’t be ruled out.
Silver outshining gold
While traders are focused on gold and its rally, investors are likely to monitor the movement of silver prices as the metal has outperformed in the precious metals sector.
According to Kitco.com, the gold/silver ratio is still quite high as it is near 82 at present. The lowest point this year was in late May, around 72.
Analysts believe that silver’s price rally is just beginning and it has been overshadowed by the recent positive uptrend in gold prices.
At the time of writing, the December silver contract was at $34.318 per ounce, up 3.2% from the previous close.
The contract had hit a more than 12-year high of $34.343 per ounce earlier on Monday.
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