Strong buying momentum pushed the world gold price above $2,700/ounce on September 26. However, some analysts expressed concern that the precious metal's price increase may be a bit too much.
“Gold prices are showing signs of stabilizing after hitting a series of new record highs following the surprise rate cut by the US Federal Reserve. Buying fatigue is starting to set in. Based on my estimates, gold prices could fall 4-6% without damaging the overall bullish sentiment,” Ole Hansen, head of commodity strategy at Saxo Bank, told Kitco News on September 27.
Hansen added that he sees initial support at $2,670 an ounce, and if that level is broken, the next level to watch is $2,547. In the worst case, gold could fall to support at $2,500 an ounce.
Alex Kuptsikevich - senior market analyst at FxPro - said he also sees that gold has little room to increase and will likely correct.
“Technically, gold has surpassed the 161.8% level of the two-year rally since August 2018 – a typical bullish extension pattern along Fibonacci levels. When prices have moved too far into historical highs, finding new upside targets becomes more difficult,” Kuptsikevich explained.
Mr. Kuptsikevich noted that US employment data due next week - as early as October 4 - could pose some risks for gold, causing prices to fall.
James Stanley, senior market strategist at Forex.com, suggests investors should consider buying gold on dips. He sees initial support at $2,650 an ounce, followed by $2,635 and $2,600.
However, some other analysts believe that gold still has momentum. Bart Melek, head of commodity strategy at TD Securities, said he expects gold prices to rise back above $2,700.
Gold remains in a favorable position as the Fed cuts interest rates to support a weakening labor market, even as inflation remains high, Melek added.
