Gold price climbs 26% in YTD. Should you book profit or wait for US Fed’s rate cut cycle?

Gold rate today: After three weeks of consolidation, gold prices moved decisively upwards last week and touched a new peak of $2,583 per ounce in the spot market. During Friday's session, Comex's gold price touched a new high of $2,611.60 per troy ounce. While climbing to this new peak, the yellow metal price surged around 25 per cent in 2024, outshining the frontline Indian stock market indices — Nifty 50, BSE Sensex and Bank Nifty. In YTD time, spot gold price has risen from $2,060 to $2,600 per troy ounce to $2,600 per troy ounce mark, logging nearly 26 per cent rise in this time, while the Nifty 50 index recorded around 16.60 per cent rise in YTD.

According to commodity market experts, the immediate reason for rising gold rates today is the buzz about the US Fed rate cut, which puts pressure on the US dollar rates. However, geopolitical tensions, inflation concerns, and market uncertainty are among the major triggers that have helped yellow metal maintain an uptrend in 2024. They said that gold prices are expected to remain bullish and touch $2,640 and $2,660 per troy ounce soon.

Triggers for gold price rally

Highlighting the reasons that are fueling gold rates today, Kaynat Chainwala, AVP-Commodity Research at Kotak Securities, said, "Comex Gold prices reached a new all-time high of $2,596 an ounce on Friday, fueled by the weakening dollar, as investors anticipated an interest rate cut by the Fed next week. Initial jobless claims increased as anticipated, while PPI rose more than expected. Additionally, the Euro gained against the dollar as the ECB refrained from pre-committing to a particular rate path, reaffirming the need to take a data-dependent and meeting-by-meeting approach."

"As per CME FedWatch Tool, there is now a 43% chance of a 50-bps, up from 14% a day ago. Geopolitical tensions, particularly in Ukraine, the Middle East, and US-China relations, alongside central bank gold purchases, are expected to sustain gold's safe-haven demand soon. For today, investors will be watching the University of Michigan's Consumer Sentiment and inflation expectations for additional insights into the US economy and its potential impact on the Fed's decision," Kaynat Chainwala added.

Narinder Wadhwa, Managing Director of SKI Capital, said, "Central banks worldwide have significantly increased their gold purchases recently, further boosting the metal's value. This trend highlights a strategic shift toward diversifying reserves amidst rising global economic instability and currency volatility concerns. Central banks, particularly in emerging markets, seek to reduce their reliance on the U.S. dollar and other fiat currencies, making gold a key asset for maintaining financial stability."

Gold price outlook

Regarding the outlook for gold price today, Alex Kuptsikevich, Senior Market Analyst at FxPro, said, “In terms of technical analysis, the latest spurt was an acceleration of growth after a prolonged consolidation with an upward bias since April. This pattern is called a rising bullish wedge, the upper boundary of which the price overcame yesterday. Although gold has been gaining steadily, the extended consolidation at the end of last month removed excessive local overbought conditions, clearing the way for a rally, some of which we saw this week.”

"The realisation of this pattern indicates the possibility of a rise to the $2660 area, which is about $100 above current levels. A longer-term upside pattern to 161.8% of the initial two-year rise from August 2018, followed by a correction to 50% of that rise at the September 2022 lows, leads us to $2640," the FxPro expert said, adding, "Due to the triggering of abundant stop-outs, a quick rise into this area is possible. This process could develop at the start of trading on Monday. However, the sharp growth may be a suitable reason for the arrival of real sellers capable of increasing prices."

Advising gold investors to hold their position, Narinder Wadhwa said, "While booking profits at these elevated levels might seem attractive, it's important to consider the broader macroeconomic landscape. With inflation remaining sticky and central banks maintaining a cautious stance on interest rates, gold could continue to be an appealing hedge against economic instability. Additionally, upcoming events like the festive season and global demand from institutional buyers could provide further upside."

"For investors with a long-term horizon, holding onto gold could offer continued benefits, especially if economic uncertainty persists. However, those with short-term gains might consider partially booking profits while keeping some exposure intact for potential further gains. Diversifying into other assets can also help manage risks in a fluctuating market," Wadhva concluded.

Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.