Investing.com — Gold currently appears “tactically overbought” after a recent jump to record highs in the yellow metal’s price, according to analysts at Bank of America.
rose 0.7% to $2,674.56 per ounce, while the December expiration rose 0.5% to $2,697.60 per ounce at 06:57 ET (10:57 GMT).
Underlying the increase is a massive 50 basis point rate cut by the Federal Reserve last week, as well as bets that the central bank will make further cuts this year.
However, in a note to clients, Bank of America analysts said that while gold prices are well above the 200-day moving average, returns have historically been “flat 1-6 months after trading at such extremes.”
“Gold investors are also giving a discount of 150-200 [basis points] of interest rate cuts according to our estimate. If Fed cuts are slower than expected, the pace of gold appreciation could also slow,” Bank of America analysts wrote.
“Nevertheless, support for prices is clear.”
Investors are now focused on an upcoming speech from Fed Chairman Jerome Powell on Thursday, while key US economic data also emerged.
Powell will deliver pre-recorded remarks at the US Treasury Market Conference in New York at 9:20 a.m., according to the Fed’s website.
After last week’s excessive rate cut, Powell said the move was part of a “recalibration” of policies aimed at protecting the U.S. labor market while sustainably returning inflation to the Fed’s 2% target.
Several other policymakers have defended the big pullback this week, including Fed Governor Adriana Kugler, who said Wednesday that the rate-setting Federal Open Market Committee must “balance its focus” between suppressing price pressures and avoiding “pain” in the broader economy. .
But Fed officials are not unanimous in their support for the size of the cut. Fed Governor Michelle Bowman, who voted to cut borrowing costs by a more traditional 25 basis points, has said she remains concerned about lingering inflation risks.
