Historic Gold Bull Run Continues – But is a Pullback Imminent?

 

Gold’s Historic Bull Run Continues – But How Long Will It Last? 

(Bullion News Network) – Gold prices increased slightly today, gaining just a few dollars to close above $2,660. This marks the seventh consecutive day of gold gains amid a historic price run that has driven the precious metal to multiple new all-time highs. Two factors continue to motivate price surges in the gold market: lingering bullishness after the Fed’s jumbo 50 bps rate cut and growing geopolitical tensions in the Middle East. 

After a marginally green Monday, gold prices rocketed past $2,650 as traders reacted to ongoing escalations in Israel’s war with Lebanon-based Hezbollah, a conflict that could threaten the stability of the entire region. Geopolitical instability has historically been a boon for precious metals like gold, which tends to perform well during periods of conflict or war. Israel’s bombing runs on strategic Hezbollah outposts in Lebanon represent a fresh escalation in a years-long conflict, according to experts. 

The impact of last Wednesday’s rate cut from the Federal Open Market Committee is also likely driving gold’s newest bull run. After a series of promising inflation readings and lackluster U.S. job market signals, the Federal Reserve moved to cut interest rates by 50 basis points on September 18th, the first rate cut by the Fed since 2020. The decision was not without controversy; cutting rates is an inflationary action and could suggest that the Fed is playing defense against a recessionary climate. For gold, the aggressive rate cut increases the appeal of inflation-proof assets, including precious metals. 

Analysts are divided on how long the gold bull run will last, though. Some experts say gold prices will remain elevated heading into 2025 as traders grapple with a dovish Fed and an increasingly volatile global geopolitical climate. Others argue that gold’s meteoric rise in August and September increases the odds of a pullback. 

Experts Weigh In: Here’s What To Expect From the Gold Market in Q4 2024

Not all analysts are bullish that gold will continue crushing resistances on the path to $2,700 heading into the fourth quarter of 2024. Christopher Lewis, an economic analyst for FX Empire, says the odds of a gold price pullback is high. His position is cautiously bullish, as higher gold prices are still a distinct possibility: 

At this point in time, I think the likelihood of a pullback is pretty high, but we could continue to go higher. The question of course is whether or not you really way to chase the gold market after the big move […] The U.S. dollar is a little oversold and the gold market is a little overbought.

Several major banks are betting that gold’s historic bull run will continue into 2025, Reuters reports. Major U.S. banks anticipate that a combination of factors is key to gold sustaining its gains heading into Q4 of 2024 and beyond, but that the precious metal is primed to extend its gains into next year. UBS analysts argued in August that “gold has more room to run over the next six to 12 months,” especially given “a revival in large inflows to exchange traded funds.” 

Gold prices hit a new record high, surpassing $2,670 per ounce, driven by increasing demand and lower interest rates, leading to strong inflows into gold ETFs like $GLD, $IAU, and $GLDM. https://t.co/YNGx4JNRDp

— etf.com (@etfcom) September 25, 2024

In any case, a set of key economic and geopolitical events in October and November will be a real test for gold’s bull run.

Traders should watch major conflicts in the Middle East, particularly between Israel and Lebanon, for news on whether or not the upside potential of risk-mitigatory gold will continue to increase amid inflamed tensions. The volatile situation between these two states jeopardizes stability in the entire region, so further escalation would likely put bullish pressure on safe haven commodities, including gold. 

Another Federal Reserve meeting set for November will come just one day after a contentious U.S. election, making it one of the most important trading days of the year. At this meeting, the Fed is expected to cut rates once again, this time by either 25 or 50 basis points. Rate cuts have traditionally boded well for gold prices, and the surprise 50 bps cut last Wednesday continues to lend tailwinds to gold’s ongoing run. 

The status of U.S. election will undoubtably play a role in determining where gold prices will go heading into the last month of 2024. Regardless of the outcome of the presidential race, expect volatility to drive traders toward safe haven assets to hedge their bets as the U.S. transitions into a new White House administration.