Gold price recorded a new all-time high on May 20, 2024, trading above the previous high of US$2,431 an ounce recorded in mid-April this year.
The precious metal broke out of its recent consolidation on the back of US consumer price index (CPI) data for April, which was in line with market expectations. The headline and core CPI figures matched estimates of 3.4 per cent and 3.6 per cent, respectively. As a result, traders raised the implied probability that the Federal Reserve would begin cutting interest rates in September.
This led to a dovish repricing of the US dollar and shorter-dated Treasury yields, providing the catalyst for gold to resume its uptrend, given the inverse cross-asset relationships.
Furthermore, gold was also a beneficiary from increased safe-haven demand from fears of geopolitical instability in the Middle East following the death of Iran’s president in a helicopter crash.
From a technical standpoint, gold prices have shown promising signs to scale new heights going forward. It broke out of a month-long bull flag consolidation in mid-April this year, following the release of US CPI data.
Subsequently, prices climbed higher and retested the previous all-time high of US$2,431 per ounce, before experiencing a slight retreat. This price action indicates that gold buyers are prepared to resume the longer-term uptrend, suggesting the likelihood of new highs in the future.
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In addition, the bull flag breakout was supported with a bullish crossover of the faster 12-day simple moving average (SMA) over the slower 26-day SMA. This suggests bullish momentum is increasing in the near term, and gold price is expected to trend higher.
The previous instance of this signal occurred in early March this year when the price broke out above the US$2,050 per ounce level and embarked on a strong rally to reach US$2,431 per ounce.
Last but not least, a recent bullish crossover on the Moving Average Convergence Divergence technical indicator also suggests a shift in momentum towards the bulls.
Moving forward, with the several reasons aforementioned, gold price is expected to scale new heights on the back of its recent bull flag breakout.
The writer is a research analyst at Phillip Securities Research
