Gold prices are approaching all-time highs. Keep an eye on these key data this week!

Last Friday (December 1), November's record close was not enough for gold investors, as strong momentum had pushed prices to record highs by the end of the week. Powell's efforts to dampen expectations of a rate cut backfired, with spot gold nearing its all-time high of $2075.47 an ounce set on August 7, 2020.

(Spot gold trend chart, source Yi Huitong)

Spot gold closed at $2071.93 an ounce, up 1.76%.

COMEX February gold futures settled 1.58% higher at $2089.7 an ounce.

[Market News Analysis]

Gold has seen renewed buying momentum as markets continue to digest expectations of a rate cut as early as March. The precious metal has continued to rise despite central banks' tightening stance. On Friday, Jerome Powell, chairperson of the Federal Reserve, said he still did not believe monetary policy was restrictive enough to bring inflation down to 2 per cent.

Bond traders upped their bets on a Fed rate cut next year, even as Fed Chairperson Jerome Powell reiterated that it was too early to speculate on policy easing. The yield on the two-year Treasury fell as much as 11 basis points to 4.57 per cent, the lowest since June, as traders upped their bets on how much to cut rates in the coming year. The CME Fed Watch tool shows that the market now sees a more than 50 per cent chance of a rate cut in Quarter 1 in 2024.

Forexlive.com market analysis manager Lukman Otunuga said: "Fed tapering still supports precious metals, while technical factors continue to support upward momentum." Without any new fundamental catalysts, November's monthly close could break above $2,000. Provide the basis for bulls to push prices higher. "

Naeem Aslam, chief investment officer at Zaye Capital Markets, said this could be the start of a bigger move for gold, with "brighter days ahead".

"Regardless of what some members of the Fed continue to say, we think the Fed has reached the peak of its rate hike cycle," he said. "We think there is a real possibility that the Fed will cut rates by the end of Quarter 1 next year. However, the threat remains stubborn inflation. If we don't see CPI hovering at 3 per cent or even lower, the Fed may hold rates at current levels until the end of the first half."

Traders believe Powell's speech today was more dovish, with gold prices rising near record highs. Federal Reserve Chairperson Jerome Powell said the Fed's policy rate "has entered a restricted range" and gold prices are once again near record highs. Traders believe Powell's latest remarks were more dovish, with US Treasury yields and the dollar falling further, sending gold prices up 1.6% to as high as $2,075 an ounce, less than $5 from the all-time high set in May 2020. Gold prices are set to rise for a third consecutive week. Investors chose to ignore Powell's rebuttal to Wall Street's growing expectations for a rate cut in the first half of 2024. The swap market now sees a more than 60% chance of a rate cut in March. Monetary easing typically favors non-yielding assets such as gold.

Although the Federal Reserve's aggressive monetary policy still poses a risk to gold, some analysts say a slowing economy means that eventually the Fed's next move will be to cut interest rates, which may come sooner rather than later.

Nicky Shiels, head of metals strategy at MKS PAMP, noted that while economic data remains fairly resilient, gold is likely to be sought after by safe-haven buyers. "Gold is internalizing people who don't see it that way. Experts talk about'the breakdown of our economic health and social fabric ', but less spectacularly, people are just feeling worse than before, and that shows through safe havens," he said.

At the same time, analysts pointed out that gold prices continued to rise despite the fact that most retail investors shunned the market. Analysts say that when this sentiment starts to shift, the price of gold will not really fluctuate.

Despite this optimism, some analysts are advising investors to be cautious about gold at current levels and not to chase the market.

Barbara Lambrecht, commodities analyst at Commerzbank, said gold prices could be constrained ahead of Friday's non-farm payrolls report.

"This is because the current expectation of a 50 basis point Fed rate cut by mid-2024 is more likely to be missed. Therefore, we also expect a correction in the gold market. This could be triggered by the US labour market report. This weekend," she said.

Some economists said investors should also pay attention to the University of Michigan consumer confidence survey because inflation expectations have risen in recent months.

Phillip Stredible said he also thought the market was getting ahead of itself because a rate hike in March appeared unlikely, noting that the Fed was unlikely to cut rates until inflation neared its 2 per cent target.

This week, 15 Wall Street analysts participated in the Kitco News gold survey. Eight experts (or 53%) expect gold prices to rise this week, while five analysts (or 33%) expect gold prices to fall. Two experts, 13%, are neutral on gold in the coming week.

Meanwhile, Kitco's online poll received 763 votes and market participants remain as optimistic as they have been in the past two weeks. 495 retail investors, or 65 per cent, expect gold prices to rise this week. Another 155 respondents, or 20 per cent, expect prices to be lower, while 114 respondents, or 15 per cent, are neutral on the near-term outlook for the precious metal.

This week's key economic data

Tuesday: ISM Services PMI, US JOLTS job openings

Wednesday: ADP private sector employment, Bank of Canada monetary policy decision

Thursday: Weekly unemployment claims

Friday: Non-farm payrolls, University of Michigan consumer confidence survey