The financial markets have recently seen a historic surge in gold prices, breaking through the barrier of $2,550 per ounce for the first time, prompting discussions about the influencing factors behind this remarkable change.
This milestone was reached on September 12, signaling a continuation of the upward trend in spot gold prices, which rose more than 1.7% in a dayAccompanying this surge, silver prices also saw an increase of over 3%. Market analysts believe that the anticipated interest rate cuts by the U.SFederal Reserve played a significant role in this drastic rise in gold pricesRecent U.Seconomic data hinted at a potential slowdown, contributing to market speculation that the Fed may lower rates during its forthcoming meeting.
Specifically, the Labor Department reported that the number of individuals filing for unemployment benefits rose by 2,000, bringing the total to 230,000 — a clear indicator of a cooling economic environment
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While the Producer Price Index (PPI) for August registered slightly above forecasts due to rising service costs, it still presented a bigger picture of cooling inflation, reinforcing perspectives on the necessity for potential rate adjustments.
Alex Ebkaryan, Chief Operating Officer at Allegiance Gold, stated that the global economic landscape appears to gravitate towards lower interest rates, making gold a more compelling investment optionHe forecasted the likelihood of more gradual rate cuts rather than substantial ones, which could provide steady support for gold prices moving forward.
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The cascading effects of monetary policy changes from the ECB on global liquidity and interest rate perceptions cannot be understatedAdjustments by the ECB resonate throughout interconnected global markets, stoking anticipation that the global economy is indeed shifting toward a lower interest rate environment.
In light of the recent PPI data, swap traders began to strengthen their bets on a quarter-point rate cut from the Federal Reserve next weekHansen emphasized that the onset of a rate-cutting cycle could enhance support for the gold market, irrespective of the scale of revisionsTo date, gold prices have surged over 20%, fueled by growing expectations that the Fed will soon commence a rate-cutting cycle, thus elevating demand for the assetA robust accumulation of gold by central banks and significant activity in the over-the-counter market have further driven prices upward.
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Nonetheless, a prevailing sense of optimism in market risk has somewhat dampened the fervor for gold as a safe haven investmentDespite the current market sentiment, the long-term outlook for gold remains bullish, with the asset hitting a bullish target of $2,550, paving the way for a potential next target of $2,570, and possibly even higherFrom a technical analysis standpoint, when gold surges past significant resistance levels, it often spawns new upward trends, attracting additional investor interest and propelling prices further.
Apart from gold, the international oil markets are also experiencing volatility, with WTI crude oil witnessing a daily increase of over 3.5%, and Brent crude moving above 3% as wellThe market's heightened anxiety stems from worries that a hurricane could disrupt U.Ssupply chains, as the storm makes landfall on the U.Scoastline and pushes inlandThe National Hurricane Center estimates that this severe weather event, which originates from the Gulf of Mexico, has led Louisiana and nearby Mississippi to declare states of emergency.
Concerns over the storm's intensity have significant implications for oil prices, with the U.S
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Bureau of Safety and Environmental Enforcement noting that nearly 38.56% of crude oil production and 48.77% of natural gas output in the Gulf of Mexico have been shut down due to weather-related impactsThis loss in production capacity may exert upward pressure on prices; however, declining demand signals within the U.Sare curbing more extensive price escalations.
According to UBS analysts, the hurricane may have disrupted approximately 1.5 million barrels of U.Soil production, with an expectation of a reduction of about 50,000 barrels daily from the Gulf’s output in SeptemberThey further conjectured that Brent crude prices could rebound above $80 per barrel in the upcoming months.
