Gold Rally Stalls, Analysts Warn

Investing.com – The gold rally is showing signs of stalling, according to HSBC. The precious metal may face further declines unless severe geopolitical risks arise.

XAU/USD surged to a record $2,685.42 per ounce on September 26 and has increased around 28% this year, aiming for its largest annual gain in 14 years. This surge is attributed to the onset of U.S. Federal Reserve interest rate cuts and rising geopolitical tensions.

However, the current lack of market response to Middle Eastern events suggests that the gold market is becoming somewhat desensitized to news from that area.

Currently, analysts at HSBC noted that “safe-haven” investments are increasingly flowing into the US dollar rather than gold. They mentioned that the arguments for 50 basis points (bp) of cuts by year-end are beginning to overshadow expectations of 75 bp cuts, which could negatively impact gold prices. Additionally, comments from Fed officials may gain more importance moving forward.

The upcoming nonfarm payroll data for September could influence gold's price. A disappointing result may provide a push for gold, despite the positive ADP report, as there is no direct correlation between the two.

If the labor data fails to impress, gold may see slight declines, especially considering that China, a significant buyer, remains inactive in the market.