Gold overbought and copper limited by mixed global cues

24 sept.

Gold prices hit record highs driven by expectations of further U.S. interest rate cuts. The golden metal rose 0.3% to $2,638.31 an ounce, benefiting from the Federal Reserve's decision to cut rates and the possibility of further cuts. Tensions in the Middle East and mixed economic signals in major economies also contributed to gold demand.

On the other hand, copper prices rose 1.6% to US$9,702.50 per ton, following the announcement of stimulus measures by the Chinese government, including reductions in bank reserve requirements and mortgage rates. These policies fueled hopes of an economic recovery in China, the world's largest copper importer. However, copper's advance was limited by mixed signals in global manufacturing activity. Other precious metals such as silver and platinum also recorded slight gains.


If we look at the gold chart, it is currently halfway to the target of 2,700 dollars an ounce after three continuous bullish sessions after the pullback figure in the area of 2,570.21 dollars. Currently the RSI indicator is clearly overbought at 71.99%, how long it will take to retrace is unknown with the increased demand for gold. If we look at the Check Point (POC) of $2,320, it is currently in the strong trading range completed in the second week of August. A price cut to $2,500 could be among the possibilities if the U.S. and Europe correct and make the much-recommended rate adjustments to facilitate lower volatility, although there could be temporary spikes if the rate hikes do not react as expected. When interest rates are raised, gold tends to be affected to the downside for several reasons, mainly because the opportunity cost of holding non-interest-bearing assets such as gold increases. Investments that do offer returns, such as bonds or deposits, become more attractive in a higher rate environment. As can be seen in the market, there are currently record highs in several indices, which could be counterproductive in the long term to keep the stock market more in line with reality, and this is where gold plays its role along with bonds.

Ion Jauregui - Analyst Activtrades




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