(Kitco News) - Gold’s break above $4,100 has slowed, but analysts note that bullish fundamental factors continue to point to further upside risk for the precious metal.
Last week, Alex Kuptsikevich, Chief Market Analyst at FxPro, was bearish on gold, noting that the sharp decline from last month’s record highs caused significant technical damage to near-term price action.
However, in an updated note on Tuesday, Kuptsikevich said that rumours of gold’s demise appear to be greatly exaggerated. Spot gold last traded at $4,133 an ounce, up 0.18% on the day and more than 3% so far this week.
Kuptsikevich noted that gold’s push above critical near-term resistance levels has created new bullish momentum in the marketplace. He added that upside risks remain supported by ongoing geopolitical and economic uncertainty.
“The outlook for the precious metal is no longer as bearish as it was a week ago. Growing political uncertainty, stemming from the potential repeal of tariffs by the Supreme Court and the Fed's dovish stance, is creating tailwinds for Gold,” he said.
At the same time, although gold prices remain elevated, the two-week correction has helped ease overbought market conditions.
“The October rout of Gold is no longer perceived as a burst bubble. Yes, speculators pushed gold too high, too fast. However, many of them joined the gold rally late. They began to offload their long positions as soon as they smelled trouble. As a result, we saw a correction. Whether it will continue or resume will be revealed by macroeconomic statistics from the United States and the Fed's verdicts,” he said.
Nick Cawley, Market Analyst at Solomon Global, is also bullish on gold as the precious metal continues to make gains alongside equity markets.
Cawley noted that both gold and equities are benefiting from growing expectations that the Federal Reserve will continue cutting interest rates next month, even after Federal Reserve Chair Jerome Powell’s recent warning that further easing in December is not a foregone conclusion.
According to the CME FedWatch Tool, markets now see more than a 65% chance of a rate cut before the end of the year.
“With easy money policies expected to continue and steady demand from physical buyers, the fundamentals remain strong for gold and silver. Barring any major shifts in these, both metals look likely to move higher over the coming weeks,” he said.
David Morrison, Senior Market Analyst at Trade Nation, said that although the gold market does not appear to be overbought, Wednesday’s slower gains could indicate that some investors are hesitant to enter at current levels.
“Overall, gold is managing to hold on to gains made since last Tuesday’s low. The daily MACD continues to look constructive from a bullish perspective as it curls up off neutral levels. But there’s also a hint of nervousness out there. Some participants are concerned that the pullback from last month’s all-time highs may not be over. They feel that gold may need a bigger correction than the one seen to date, given the size of the upward move,” he said.
