GOLD PRICE FORECAST: XAU/USD RALLY IS FRAGILE – COMMERZBANK

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Gold (XAU/USD) nears all-time high despite little change in US interest rate expectations. Economists at Commerzbank analyze the yellow metal’s outlook.

Gold flying high

Both the University of Michigan survey and the ISM Institute signalled a significant deterioration in US business and consumer sentiment in February which was in contrast to analysts' expectations (according to Bloomberg) which had actually expected the situation to improve. However, this had little, i.e. not a sustainable, impact on the market's expectations for US interest rates, hence the market reaction on the Gold market came as a bit of a surprise. This suggests that the fall in gold prices in the first half of February in the wake of reduced expectations for US rate cuts is now seen as overdone.

As the new week begins, Gold continues its upward trajectory. On Monday, the precious metal almost reached its record high of $2,135 set at the end of last year. This time there was no trigger for the jump. 

As there is still a lot of uncertainty about the start and extent of the next interest rate cut cycle in the US, we think the rally is fragile. We would not be surprised to see a small downward correction in the coming days on the back of profit-taking.

 


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