The chaos in the Middle East seems to be limited to Gaza as Israel continues its war against Hamas. However, the stable geopolitical environment is having a negative impact on gold, with prices stuck at $2,000. However, according to analysts, its latest moves are likely just the beginning for the shiny metal.
It’s no surprise that gold is losing some momentum
Performance in October was quite good for the precious metal. Despite this, some investors are feeling a little disappointed. The fact that gold does not have the power to reach its peak target in absolute terms probably plays a role in this. Meanwhile, cryptokoin.comAs you follow from , gold prices closed the week at $1,992. That’s about 4% away from the all-time high in 2020.
$2,000 represents an important long-term resistance point for gold. Therefore, prices will need to consolidate or pull back slightly to reach $2,100. With this in mind, it’s no surprise that gold has lost some momentum. Certain geopolitical events fail to provide sustainable momentum for gold. The problem with safe haven demand is that the market needs things to constantly escalate. When tensions calm down, or at least do not escalate, the need for a safe haven begins to diminish.
World Bank: Gold prices will increase by 6% in 2024!
At the same time, world events create a very volatile market. This week, the World Bank predicts that gold prices will increase by 6% in 2024 due to the impact of geopolitical uncertainty. In this context, analysts make the following assessment:
Conflict in the Middle East will lead to increased global uncertainty. Additionally, if the conflict escalates, it will have significant impacts on gold prices. While the initial impact has been modest so far, escalation of the conflict will further increase this uncertainty. This will lead to a decrease in risk appetite and a decrease in consumer and investor confidence.
We will see upward sloping and fluctuating gold prices
However, it is not only what happens in the Middle East that affects gold. Analysts expect the precious metal to remain well supported at current levels as overall geopolitical uncertainty remains high. According to analysts, certain events will attract the market’s attention. However, it will then fade into the background. However, chaos and volatility will not go away anytime soon. Market analyst Neils Christensen comments:
Decades of de-globalisation, the global trend towards de-dollarization, the transition to green energy and the need to develop domestic sources of critical materials continue to destabilize the world and fuel geopolitical uncertainty. In this environment, it is reasonable to expect gold prices to fluctuate along an upward sloping trend line.
Geopolitical events will create short-term momentum underneath!
In addition to geopolitical uncertainty, it is also notable how resilient US consumption is. Despite this, fears are growing that the global economy is heading towards recession. Meanwhile, weaker-than-expected economic data will likely prompt the Federal Reserve to finish raising interest rates even as it continues its tightening trend. Looking ahead, Christensen describes what he sees for gold as follows:
On the other hand, geopolitical events will create short-term momentum. However, an eventual change in the Fed’s monetary policy could be a bigger factor in sustainably high prices. Prices have risen nearly 9% from seven-month lows in the past four weeks. However, much of this is due to a shift in speculative positioning. Long-term investors continued to stay away from the market as their holdings in gold-backed exchange-traded products (ETFs) remained fairly stable throughout October.
Long-term investors are hesitant to enter gold
Analysts state that long-term investors are hesitant to enter gold as the Fed continues its tightening trend. According to analysts, higher interest rates will push up both the US dollar and bond yields. This will create two significant headwinds for gold. As markets view the Fed’s next move as a cut, it’s possible that investors will return to gold once these headwinds begin to abate.
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