Gold has maintained or even increased its appeal as a safe-haven asset in the last few trading sessions.
This has led to chatter in the market that the yellow metal may hit $4,000 per ounce in the coming weeks.
“The recent erratic moves in US Treasuries, along with the persistent US dollar sell-off, have diminished the standing of both as obvious places in which to park funds during market disruptions,” said David Morrison, senior market analyst at Trade Nation.
“This means that gold has maintained, or even increased, its attractiveness for investors, despite trading at overbought levels, according to its daily MACD,” Morrison added.
On Wednesday, the precious metal on COMEX hit another record high.
This time, gold surpassed the $3,300 per ounce level for the first time ever, and hit a record high of $3,333.29 per ounce.
At the time of writing, the most-active June contract of gold on COMEX was 2.6% higher from the previous close.
Can gold prices hit $4,000/0oz?
Morrison said:
Interest in gold is growing, with commentators ready to rush out with analysis to justify price targets of $4,000 or even $5,000 per ounce.
At present, all the attention in the gold market is around how much further can prices rise?
According to Morrison, the precious metal is at overbought levels, but that has not been stopping investors from buying gold.
“The rise in the gold price is also partly in line with the continuing weakness of the dollar, which points to a gradual erosion of the US currency’s status as a safe asset — gold is likely to be an alternative for many USD investors,” Thu Lan Nguyen, head of commodity research at Commerzbank AG, said in a report.
“The recent strong inflows into the world’s largest gold ETF could also indicate this,” she added.
Trade jitters and NVIDIA warning
Investors, nervous about US President Donald Trump’s plans for additional trade tariffs, sought safe haven in gold, increasing demand on Wednesday.
Trump’s plans include tariffs on electronics and pharmaceuticals, which he announced earlier this week.
“The exemption of some electronics products from the reciprocal US tariffs has provided some relief on the stock market, although expectations were quickly dampened again by the threat that the products would soon be subject to sectoral tariff,” Nguyen said, adding that this was one of the reasons for gold’s surge over the last couple of sessions.
Additionally, Wall Street heavyweight NVIDIA Corporation announced on Tuesday that new US restrictions on chip exports to China will result in a $5.5 billion impairment charge in its first-quarter earnings.
The potential move to restrict NVIDIA and similar chip manufacturers from selling to the significant Chinese market led to heightened risk aversion.
Consequently, US stock futures and major tech shares in Asia experienced substantial aftermarket losses.
The restrictions could also potentially block Chinese companies from accessing AI development, and may result in retaliatory measures from Beijing.
Monetary policy
Further support for gold comes in the form of increased expectations that the US Federal Reserve will cut interest rates more aggressively.
“The prospects for more aggressive policy easing by the Federal Reserve (Fed), amid growing concerns about a tariffs-driven US economic slowdown, could underpin the non-yielding gold price,” Haresh Menghani, editor at FXstreet said in a report.
Market expectations currently include a potential 100 basis point interest rate reduction by the Federal Reserve in 2025, according to the CME FedWatch tool.
Source: CME Group
The ECB is generally expected to cut interest rates this week and in view of the uncertainty triggered by US tariff policy, it will certainly keep the door open to further easing.
“The US Fed’s course of action is less clear, as it sees itself confronted with inflation risks as well as an economic slowdown,” Nguyen said.
However, Minneapolis Fed President Neel Kashkari has recently expressed caution regarding this matter.
He saw no need to lower interest rates as a precautionary measure.
“If other Fed representatives, above all Fed Chair Powell, make similar statements in the coming days, this could take the wind out of the sails of the gold price rally,” Nguyen noted.
Gold’s march to $4,000 won’t be straightforward
Experts said that the current rally in gold prices will continue with several factors at play.
However, experts also anticipate that gold prices could correct and investors must wait for some sort of consolidation.
The Relative Strength Index (RSI) on daily/4-hour charts is indicating slightly overbought conditions, which suggests that bullish traders should exercise caution, according to Menghani.
Source: FXstreet
“Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciating move for the gold price,” he added.
Meanwhile, Trade Nation’s Morrison believes that gold prices could correct sharply from current levels, but did not rule out the precious metal hitting $4,000.
“It’s unlikely to rally to such dizzying levels in a straight line. This is not to suggest that it can’t make further gains from current levels,” Morrison said.
Rather, it’s to express the need for caution given the size and length of the rally to date.
It is the nature of that pullback which will help decide whether gold’s rally is complete, or if there’s more upside to come.
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