As the Middle East conflict intensifies and the Federal Reserve's decision looms, global financial markets are in turmoil. The gold market, as a safe-haven asset, has become a focal point. Despite being pressured by strong U.S. retail sales data, gold prices briefly approached $2560 per ounce but then rebounded to $2570 per ounce.
In the Middle East, Hezbollah in Lebanon accused Israel of orchestrating a series of explosions, escalating tensions. History shows that geopolitical uncertainty often boosts the demand for safe havens, thereby supporting gold prices. Such events not only trigger market risk aversion but also heighten investor awareness of potential global economic risks.
Meanwhile, market focus shifts to the upcoming Federal Reserve rate decision. According to predictions from the Chicago Mercantile Exchange, there is a 63% probability of a 50-basis point rate cut and a 37% chance of a 25-basis point cut. The extent of the rate cut will not only affect the trajectory of the U.S. dollar but also directly impact the investment costs of non-yielding assets like gold. Low-interest rates generally benefit gold as they reduce the opportunity cost of holding it.
Major global investment banks have differing views on this. Goldman Sachs predicts that the Federal Reserve may only cut rates by 25 basis points this week, causing a short-term pullback in gold prices. However, with continuous capital inflows into gold ETFs, gold prices are expected to reach new highs in the long term.
It is noteworthy that some professionals analyze that the technical outlook of the gold market shows a risk of correction. According to technical analysis models, gold prices may test the support level at $2550 per ounce. If breached, prices could further dip to $2485 per ounce. Conversely, if it breaks the historical high of $2589 per ounce, a new round of increases may begin, with targets of $2600, $2650, and even $2700 per ounce.
Besides focusing on the Federal Reserve's decision, the global economic situation also impacts the trend of gold prices. As global supply chain issues worsen, inflation continues to rise, and geopolitical tensions in the Middle East remain volatile, market investors' expectations for the future tend to be cautious.
The Federal Reserve's decisions will continue to dominate the short-term trend of the gold market, but any new developments in the Middle East could further amplify risk aversion. In an environment of increasing uncertainty, investors need to closely monitor global developments and the monetary policies of major central banks to cope with potential market fluctuations.
