Gold Market Analysis

Gold currently appears "tactically overbought" after a recent surge to record highs, as noted by analysts from Bank of America.

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

This rise in gold prices has been supported by a 50-basis point interest rate cut from the Federal Reserve last week and speculation of further cuts later this year.

However, Bank of America analysts warn that despite gold prices being significantly above their 200-day moving average, historical trends indicate that returns tend to be "flat" for 1-6 months following trading at these extremes.

They also mention that investors seem to be pricing in 150-200 basis points of additional interest rate cuts. If the Fed moves slower than anticipated, the growth in gold prices could also decelerate. Nonetheless, they believe that support for gold prices remains strong.

Market attention is now shifting toward an upcoming speech by Fed Chair Jerome Powell on Thursday, alongside crucial economic indicators from the U.S. Powell will present pre-recorded remarks at the US Treasury Market Conference in New York at 09:20.

Following last week’s significant rate cut, Powell indicated that this adjustment is part of a "recalibration" aimed at safeguarding the U.S. labor market while striving to reduce inflation to the Fed's goal of 2%.

Other policymakers have supported this substantial reduction, emphasizing the need for the Federal Open Market Committee to balance the fight against inflation with avoiding negative impacts on the broader economy.

However, consensus among Fed officials regarding the extent of the cut has not been unanimous. Fed Governor Michelle Bowman, who advocated for a more conventional 25 basis point reduction, has expressed concerns about ongoing inflation risks.