3 Key Reasons Gold Could Reach Further All-Time Record Highs

- Gold has continued its historic rise, reaching a new record high of $2,640 an ounce at the time of writing. It may continue to break this peak. Expectations of further interest rate cuts by the Federal Reserve are a key driver of this surge.

?- Additionally, the news of a large stimulus package in China, including interest rate cuts, is another contributing factor. Meanwhile, escalating geopolitical tensions in the Middle East are boosting safe-haven flows into the yellow metal.

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3 key reasons that may drive gold to record highs are as follows:

1- Expectations of Further Federal Rate Cuts?

- Gold is peaking as market expectations rise for the Federal Reserve to implement a new double rate cut of 50 basis points, or 0.50%. The chances of such a cut at the November meeting are currently 50.2% versus 49.8% for a 25 bps cut, according to the CME FedWatch tool.

2- China Gives Strong Support to Gold

- Gold received strong support after the People's Bank of China (PBoC) announced its largest stimulus package since the COVID pandemic. The PBoC is seeking to combat deflation and support the economy in achieving the official annual growth target of around 5.0%.

- The broader-than-expected package, offering more funding and interest rate cuts, represents the latest attempt by policymakers to restore confidence in the world’s second-largest economy after a series of disappointing data raised concerns about a prolonged structural slowdown.

- The PBoC announced it would cut the seven-day reverse repo rate, a new benchmark, by 20 bps to 1.5%, the medium-term lending facility by 30 bps to 2.30%, and the one- and five-year prime rates by 25-30 bps.

- The PBoC governor announced that the central bank would soon reduce the amount of cash that banks must hold as reserves—known as the reserve requirement ratio (RRR)—by 50 bps. This could potentially free up around 1 trillion yuan ($142 billion) for new lending. The RRR may be lowered by an additional 25 to 50 bps later this year, depending on the market liquidity situation. China is the world’s largest market for gold.

3- Middle East Tensions Push Gold to New Record Levels

- Rising tensions in the Middle East are supporting safe-haven flows. Gold could rise further if the situation escalates into a wide-scale and highly dangerous conflict.

Expected Movement of the Yellow Metal: Gold Could Reach a New High of $2,650

Both fundamental and technical analyses suggest further upside for gold in line with long, medium, and short-term uptrends. The next targets for gold are $2,650 first then $2,670 and $2,700 in extension. If gold fails to close D1 above $2,670 per ounce, a strong correction may begin, extending down to the strong psychological support level of $2,600 per ounce then $2,550 as an extension.

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