The gold market continues to see strong fluctuations as the precious metal has just set a new record high this week. Despite the potential risks, the upward trend in gold is unlikely to be reversed, as analysts increasingly bet on the $3,000/ounce mark next week.
According to Kitco News, gold is having an unprecedented series of price increases, with 8 consecutive weeks of closing sessions in a positive zone and continuously setting new peaks. This is the longest increase since mid 2000 - when gold first reached the 2,000 USD/ounce mark.
On February 22, the world spot gold price is fluctuating around 2.935.80 USD/ounce, up more than 2% compared to the end of last week.
Despite signs of overbought gold, Christopher Vecchio, Head of futures and Forex at Tastylive.com, said he cannot ignore gold's strong bullish momentum.
Vecchio said that the upward trend from bottom to top of gold is just a matter of time before prices reach $3,000/ounce and above. He also stressed that gold is holding its upward momentum on the 5-day moving average, suggesting the market is still maintaining optimism.
Gold is able to adapt to many different macroeconomic factors to maintain an uptrend, Vecchio said. The main drivers of gold's price increase - inflation concerns, a breakdown in global trade, and the shift away from traditional central bank currencies - have yet to show signs of weakening.
Lukman Otunuga, Head of Market Analysis at FXTM, also agreed that gold still has a lot of room for price increase, especially in the context of continued escalating geopolitical instability. Cash flow into gold ETFs has increased significantly in recent weeks.
He also warned that political developments in Europe could be a factor driving safe-haven demand for gold next week.
On February 23, Germany - Europe's largest economy - will enter an important election. If the result leads to a shaky parliament, it could create a wave of risk evasion, pushing up demand for safe-haven assets like gold, Otunuga said.
In addition to political factors, the US PCE inflation report on February 28 could also impact gold, as this data affects expectations of a Fed rate cut. If the report shows that inflation has cooled down, the possibility of the Fed loosening monetary policy will be higher, thereby supporting gold prices.
Technically, Otunuga predicts that if gold cannot hold above $2,950, a correction could appear to $2,900. On the contrary, if buyers push the price above 2,950 USD, the next mark will be 3,000 USD - an important psychologically important milestone in the market.
James Stanley, Senior Market Strategist at Forex.com, predicts that gold prices will not face many obstacles until they reach $3,000. However, he noted that after reaching this mark, gold could fluctuate around there for some time before establishing the next trend.
I predict gold will go to $3,000, but it could be flat for a while after that, Stanley said. He said that gold's increase after this mark will depend largely on the US government's fiscal policy and the Fed's monetary orientation.
Gold is rising because even though the Fed keeps rates unchanged, they know they cannot continue raising interest rates any more, he said.
