Gold prices retreat from all-time high

Gold prices skyrocketed to an all-time high of $2,137 per ounce at Monday’s opening, but suffered a correction later in the day, plummeting to $2,025 per ounce. If gold prices increase, resistance may be encountered near $2,137 per ounce, while if gold prices decline, support may be found near $1,984 per ounce. 

Gold prices surged in early trading on Monday as renewed hostilities between Israel and Hamas boosted the appeal of the safe–haven asset. A ceasefire last week had raised hopes that the fight may be over, but as the two sides resumed fighting over the weekend, gold prices were catapulted to a record high.

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar rallied on Monday, after retreating for three straight weeks on expectations of a Fed pivot. Markets seem to have priced in interest rate cuts, allowing the dollar to recover, with the dollar index rising to the 103.7 level. US treasury yields edged higher on Monday propping up the dollar, with the US 10-year bond yielding approximately 4.29%.   

Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise. Gold prices are propped up by expectations that the Fed’s tightening cycle is coming to an end, signaling the start of a Fed pivot. At the latest Fed meeting, FOMC members voted to keep interest rates unchanged at a 22-year high within a target range of 5.25% to 5.50%. Market odds of another rate hike in December have dropped to zero, while markets are pricing in rate cuts as early as March. Expectations that the Fed may start cutting interest rates from the first quarter of 2024 are propping up gold prices.

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Written by:
Myrsini Giannouli

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