Weekly Outlook: Gold to keep rising on geopolitical strife

October 19, 2024 (MLN): The most dramatic shift of the year has been the gold price, which has easily soared past $ 2700 and shows no signs of slowing down.

The strength of the US Dollar, the steadier US economy, the possibility of inflation picking up and yields on 10-year US Treasuries over 4% have all been ignored by gold.

Because of the shift in the Global Central Bank's angle it appears that gold is unstoppable. When the Asian crisis of 1998 struck, it was initially averaging $ 294, which led to a surge in demand. 

The unpredictability of the geopolitical environment, the unresolved economic concerns between China and the USA, and Russia's active purchase after the imposition of sanctions have all contributed to the shift in favour of gold.

Because of its extreme liquidity, it is currently regarded as a safe haven asset that carries no credit risk. It can be easily swapped to increase liquidity.

Since the Asian crisis, the yellow metal has benefited greatly from the aggressive addition of gold to the foreign exchange reserves held by Central Banks worldwide.

On the other side, BRIC countries are putting more pressure on the US Dollar, which also supports gold.

As long as there is no geopolitical settlement and no correction of the global economic imbalance, the value of gold will continue to rise.

Meanwhile, as was generally anticipated, the ECB lowered its deposit rate by 25 basis points. It maintained a dovish posture while acknowledging that the Eurozone's economy is far weaker than anticipated.

China, meanwhile, is still slowing economically even after adopting steps like lowering interest rates and injecting liquidity in the banking system.

The economic performance is undoubtedly being affected by external pressure and a change in advanced economies policy towards China.

This week, the ongoing geopolitical tension, along with the numerous economic events and meetings taking place worldwide, cannot be specifically identified, will be the primary driver of the financial market.

#GOLD @ $ 2720- Following a brief upswing, gold is probably going to fall. Before a reversal, a break of $ 2702–04 will likely signal a further decline towards the $ 2694 or even $ 2682 zones.

But the upside risk still exists. Gold may rise to $ 2748 or $ 2765 on an upward break of $ 2730–32 levels.

#EURO @ 1.0866- Has strong support around 1.0780-00. It will possibly hold for a test of 1.0890-10 levels. Only break will encourage for a move towards 1.0960. Or else watch 1.0720-40.

 #GBP @ 1.3048: An upward move towards 1.3090-10 is conceivable as long as it holds 1.2965-75. However, I don't think 1.3150-60 will give up. The levels to keep an eye on the downside are 1.2910–20.

#JPY @ 149.52-USD may find it difficult to rise above 150.70–80. A break of 148.30–40 will support 147.70. Alternatively, watch out for 151.40.

The writer is the former Country Treasurer of Chase Manhattan Bank

Disclaimer: The views and analysis in this article are the opinions of the author and are for informational purposes only. It is not intended to be financial or investment advice and should not be the basis for making financial decisions.