- Gold futures surpassed $4,200 mark as the safe-haven demand remains intact.
- US-China trade tension renewed by China’s actions lent more support to the gold.
- Fed rate cut bets and an apparent dovish tilt could keep the bullion’s bull run unabated.
Gold futures have soared to fresh highs amid growing expectations of Fed easing and rising geopolitical tensions. On Wednesday, the gold prices cracked the $4,200 level for the first time, with December gold futures (GC) gaining 1.3%. Precious metals also benefit from the US-China trade conflict, increasing demand for safe-haven assets.
Trade-centric headlines remain vital for the gold traders. China’s retaliatory measures, like limiting US entities linked with South Korea’s Hanwha Ocean, have reignited the fears of a broader trade war. This has led investors to bet on gold to hedge against uncertainty. Meanwhile, Treasury yields have pulled back amid Fed easing odds, supporting gold as a non-yielding asset.
Monetary policy expectations also remain the key as markets are now pricing in at least two rate cuts in 2025, suggesting an apparent dovish tilt. According to Bloomberg, the gold’s recent rally is broadly supported by the view that the Fed will cut twice this year.
Gold futures trading volume and open interest are rising, indicating increased participation, leading to an abated uptrend. The momentum keeps the bullish pressure intact, further fueled by net longs added by speculators and institutions.
However, despite a strong uptrend, some headwinds remain. The Fed could surprise the market with further caution if tomorrow’s consumer inflation ticks up, and the gold price could see a corrective downside. Moreover, the prices are now uncharted territory that could trigger short-term profit-taking.
The medium-term view for gold futures primarily depends on these factors:
- Fed communication and whether the central bank clarifies the timing and extent of the rate cut.
- Inflation data could clarify whether the Fed would maintain a cautious approach.
- Trade risk headlines and geopolitics are essential to determining the risk sentiment.
- ETF flows and central bank purchases of gold, if continued, could keep gold prices pushing for more highs.
In short, gold futures are bullish, underpinned by dovish monetary expectations and geopolitical risk. However, the advance is not without risk, as the next data surprises or policy pivots could trigger sharp re-pricing.
