Gold Prices Hit Record Highs But Analysts Warn of Potential Slowdown
In a recent report, analysts at Bank of America have stated that gold prices are currently "tactically overbought" after reaching record highs. Gold rose 0.7% to $2,674.56 an ounce, while futures expiring in December climbed by 0.5% to $2,697.60 an ounce.
The surge in gold prices has been driven by a 50-basis point interest rate cut by the Federal Reserve, with expectations of further reductions. However, Bank of America analysts caution that returns tend to be flat 1-6 months after such extreme trading levels. They also note that investors have already priced in 150-200 basis points of rate cuts, which could slow the pace of gold gains if the Fed's cuts are slower than expected.
Despite these warnings, support for gold prices remains strong. Investors are now awaiting an address by Fed Chair Jerome Powell, as well as key U.S. economic data.
Powell has defended the rate cut as a necessary measure to protect the labor market and bring inflation back to the Fed's target. Other policymakers have echoed this sentiment, but not all have supported the size of the cut. Fed Governor Michelle Bowman, for example, favored a more modest 25 basis point cut due to concerns about inflation risks.
In conclusion, while gold prices have reached record highs, there is a possibility of a slowdown in gains. Investors should pay attention to upcoming events and data releases to gauge the future direction of gold prices and make informed investment decisions.