Recently, the gold market has shown strong upward momentum, mainly driven by expectations of a Federal Reserve rate cut and escalating tensions in the Middle East. As of September 25, the price of spot gold has stabilized around $2,650, after reaching a historical high of $2,655 earlier. Some analysts believe that gold's continued rise after the Fed's latest decision is due to the lack of bearish catalysts in the market.

In the Federal Reserve’s September decision, a more dovish monetary policy stance was signaled, and the market widely expects an upcoming rate-cutting cycle. This has put pressure on the U.S. dollar, thereby supporting gold prices. Meanwhile, ongoing tensions in the Middle East, particularly the escalating conflict between Israel and Hezbollah in Lebanon, have increased geopolitical risks, prompting investors to seek safe-haven assets, which has driven up gold prices. Additionally, the trend of global central banks increasing their gold reserves has provided further support to gold prices.

From a technical perspective, after gold prices broke through multiple key resistance levels, there may be short-term consolidation at high levels. However, the long-term upward trend remains intact. Investors should closely watch the upcoming U.S. economic data, particularly employment reports and inflation data, as these could influence the Fed's policy decisions, which in turn could affect gold prices. However, as gold has reached its long-term upward target, market participants should be cautious of potential pullback risks, especially from profit-taking pressure after prices have hit historical highs.

Overall, after breaking through key resistance levels, gold has attracted more technical buying. Although there has been a lack of significant pullbacks, the appeal of gold as a safe-haven asset may continue to rise. Investors should remain vigilant of potential risks. In the current complex international economic and political environment, it’s important to stay alert to hawkish remarks from Federal Reserve officials or signs of easing geopolitical tensions, both of which could trigger a pullback in gold prices. The first potential pullback level could drop to $2,530, at which point it may be wise to adjust investment strategies accordingly.

Hugo Leong

Gold Analyst of Hantec Group