Gold Market Analysis

Gold has been labeled as “tactically overbought” after reaching record highs, according to analysts at Bank of America.

Spot gold increased by 0.7% to $2,674.56 an ounce, while December gold futures rose by 0.5% to $2,697.60 an ounce as of 06:57 ET (10:57 GMT).

The price surge follows a significant 50-basis point interest rate cut by the Federal Reserve last week, with expectations of additional cuts this year.

Bank of America pointed out that despite the high prices, historical data indicates that returns tend to be “flat” 1-6 months after reaching such peaks. They suggested that gold investors are currently factoring in a slowdown in Fed cuts, which could affect the momentum of gold gains.

However, they acknowledged there is still solid support for gold prices. Investors are now anticipating a speech from Fed Chair Jerome Powell on Thursday, along with crucial U.S. economic data.

Powell’s upcoming remarks at the US Treasury Market Conference at 09:20 will likely address the recent rate cut and its implications for the labor market and inflation targeting.

Some Fed officials, like Governor Adriana Kugler, have expressed a need to strike a balance between managing inflation and economic stability, while others, like Governor Michelle Bowman, cautioned about potential inflation risks after the substantial rate cut.