Gold Near All-time High as Global Uncertainty Grows, Yields Fall
Gold is a precious metal traded in the forex industry as a CFD. Depending on the type of broker you choose to work with, trading gold can expand your trading journey. Investors buy bullion because it provides a good hedge against inflation and is a haven in times of uncertainty. Moreover, it is a great way to diversify your portfolio.
Dominion Options metals
Traders can take advantage of opportunities in the gold market by joining the Dominion Options family. Here, clients get some of the best spreads and execution, among other benefits.
2024 gold rally
Gold has had a strong bullish run this year, increasing by over 28% and reaching an all-time high in September. Investors who were well-positioned have taken advantage of the massive move, and some are still buying. The rally in gold came from several factors, including Fed rate cut optimism and increased central bank demand.
Rate Cut Optimism
The biggest catalyst for gold prices this year has been the anticipation of US rate cuts. When the year began, investors were pricing at least three rate cuts starting in March. Lower borrowing costs support gold by increasing its appeal as a non-yielding metal.
Therefore, when investors expect lower interest rates in the US, gold rallies. On the other hand, high interest rates take money out of gold markets as investors prefer dollar assets with higher yields.
Rate cut expectations have fluctuated a lot in 2024. When the year ended in 2023, US inflation was declining. Therefore, bets for a rate cut as early as September were high. However, when the year began, there was a spike in US inflation, which surprised most and changed the outlook for rate cuts.
Policymakers took on a more hawkish tone, and there was uncertainty about the future. Still, anticipation for cuts kept gold on a bullish trend.
However, in the second quarter, inflation started declining, bringing back rate cut optimism. Gold rose steadily as investors speculated on the timing of the first rate cut. Eventually, markets and policymakers settled on September when it became clear that inflation was on a consistent downtrend.
September Fed rate cut
On September 18, the US Central Bank lowered borrowing costs by an unexpected 50-bps. The super-sized rate cut boosted gold, pushing it to new highs. Investors had only partially priced such a move. Therefore, when it came, prices continued climbing higher. The Fed is set to cut twice more before the year ends. Gold might continue higher as interest rates in the US drop.
Economic Uncertainty
High inflation in the US led to the Fed rate-hiking cycle that hurt economic demand. Data slowly started showing economic weakness, pushing investors to buy safe-haven assets. Gold is considered one of the best buys in times of financial uncertainty. The biggest fear for most traders came after the Fed’s massive rate cut.
Notably, Fed Chair Jerome Powell said the rate cut was meant to keep the unemployment rate low. This was a clear indicator that the Fed was worried about the labor market, which caused some panic and a rush to the yellow metal.
Geopolitical Tensions
Geopolitical tensions in recent months have contributed significantly to the rally in gold. The first conflict was between Russia and Ukraine, which has continued to date. The war in Ukraine has affected the prices of most global commodities, including gold.
Moreover, the recent war in the Middle East has escalated, raising fears about the impacts on the worldwide economy. Israel has maintained its war with Gaza and is now also fighting Hezbollah in Lebanon. Meanwhile, Iran recently attacked Israel, leading to fears of retaliation and a wider war.
Geopolitical tensions come with uncertainty that pushed investors away from risky assets. All this cash flows to safer assets, including gold. The tensions in the Middle East are getting hotter and might keep the premium on gold. However, if the US and its partners manage to broker a peace deal or reduce fighting, gold might retreat.
Political Uncertainty
Although not much, there is some uncertainty about US politics. The upcoming presidential election might cause some turmoil in the market. Before the election, speculation and bets on the likely winner will show how tight the race is. The tighter the race, the more volatility the election will bring.
Furthermore, investors will look at the future regarding fiscal and monetary policy changes. Trump and Kamala Harris have different plans regarding fiscal policy that might impact the Fed’s rate-cutting cycle.
Investors buy more gold when there is uncertainty about future political moves. Moreover, they buy more gold when future leaders allow the Fed to complete its mandate by lowering borrowing costs.
Central Bank Purchases
Another major catalyst for gold is central bank demand. In recent months, central banks around the world have bought more gold to hedge against inflation and reduce exposure to risky assets. The war in Ukraine led to a surge in oil prices, increasing inflation in most countries.
As a result, much wealth was eroded, and central banks were exposed to many risks, holding currencies and other risky assets.
According to the World Gold Council, central banks led by China bought 1,037 tonnes of gold in 2023. The buying continued into 2024, keeping demand for gold high and sending gold prices to all-time highs.
China’s Stimulus Programs
This year, analysts expected China’s fragile economy to show signs of recovery in the second half. However, economic data continued showing weakness in a country that consumes a big part of global gold. Nevertheless, top officials in the country came in to rescue the situation by cutting interest rates to spur gold.
At the same time, the People’s Bank of China plans to inject more funds into the economy to support gold. The prospects of a better recovery in China have brightened the outlook for gold demand, boosting prices.
Will Gold Keep Climbing
Most of the above factors are still in play. As a result, most analysts and experts like JP Morgan expect gold prices to continue climbing.
The Fed will likely keep cutting interest rates, and tensions in the Middle East might continue. At the same time, central banks are still buying. Therefore, investors who missed the 28% climb can do their due diligence and take advantage of future opportunities.
Why Trade Gold on Dominion Options
Dominion Options spreads and execution speeds
To take part in more such moves in the yellow metal, it is essential to consider the broker you will work with carefully. Trading gold can be tricky as the precious metal is quite volatile compared to other assets. Therefore, working with a broker with the best trading conditions can improve trading performance.
Dominion Options offers tight spreads for gold, which will ensure your trading costs remain low. At the same time, traders get low execution speeds of 30 milliseconds, which reduces slippage. Delays in execution can be detrimental when trading gold, which can be quite volatile.
Gold on Dominion Options
To start trading gold with Dominion Options, register an account on the website and download the cTrader platform. On the platform, click the trade option on the left window and scroll down to the metals option. Here, click the XAUUSD option to open the gold chart in the middle window. Furthermore, you can follow the latest news on gold from the right window.
Join Dominion Options today and trade gold with some of the tightest spreads and lowest execution speeds.
