As the year draws to a close, the financial markets are witnessing remarkable surges, with gold hitting record highs and Bitcoin reaching $41,500 in the early hours of Monday, a level not seen since May 2022. Ethereum also joined the rally, rising above $2,200 in what seems to be a broad but measured upswing in the cryptocurrency market.
Gold, considered a traditional safe-haven asset, experienced a historic high, with spot prices reaching $2,100 during the first trading session of the week. Analysts predict that the global rush for bullion is poised to continue, fueled by escalating demand for safe-haven assets amid the Israeli-Palestinian conflict and expectations of interest rate cuts, which further bolster the precious metal’s appeal. Gold has historically proven its resilience during times of economic and geopolitical uncertainty, standing as a reliable store of value.
The World Gold Council’s recent survey revealed growing skepticism about the US dollar’s status as a reserve currency, with 24% of central banks expressing intentions to increase their gold reserves in the next 12 months.
Meanwhile, Bitcoin has been hovering around the $40,000 mark in recent days, finally breaching the $40K barrier early Monday morning, registering a 4% daily increase at the time of reporting, according to Binance data. Ethereum, trading at $2,205, mirrored a similar percentage gain over the past 24 hours.
Bitcoin’s remarkable performance this year, more than doubling in value, is largely attributed to investors’ speculation regarding the potential approval of a US exchange-traded fund (ETF) directly tracking its price. Despite a legal victory by Grayscale in its pursuit of a spot ETF approval, the Securities and Exchange Commission (SEC) has yet to signal imminent approval of such an ETF.
Federal Reserve Chair Jerome Powell’s recent comments, emphasizing the need for a delicate balance between maintaining tight monetary conditions and ensuring a smooth landing for the US economy, were interpreted by the market as less hawkish. Traders responded by pricing in a 90%+ probability that the Fed will maintain rates until December, with a 60%+ chance of rate cuts by March 2024. The upcoming Fed meeting on December 12 and 13 is eagerly anticipated for further insights.
The prospect of increased interest rates poses a potential challenge for gold, as higher rates reduce demand for non-yielding assets like gold in favor of higher-yielding alternatives. However, despite some intraday retracement, gold is presently trading just below $2,100, indicating a 0.70% gain for the day. In an environment where the daily chart suggests overbought conditions, a slight uptick in US Treasury bond rates attracts buyers to the US Dollar (USD), prompting some profit-taking among gold bulls.
Yet, the outlook for the precious metal remains positive, with growing expectations that the Federal Reserve will conclude its rate hikes and potentially initiate a more accommodative monetary policy by the first half of 2024. The balance between economic indicators, inflation rates, and Fed decisions will likely continue to influence the trajectories of both gold and cryptocurrency markets in the coming months. Infostride News will keep you updated on these dynamic developments as they unfold.
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