Gold Might Not Stop at ATH: Pullback to This Level Could Trigger New Buying Frenzy
LONDON (March 12) Gold prices soared to historic highs this month, and it looks like the bulls may not be done rallying yet.
This move aligns with a long-term trend and results from several overlapping factors that have favored gold bulls.
On the other hand, the U.S. labor market report has triggered mixed reactions, making it challenging to predict how it will influence the Fed's future actions.
Additionally, there have been downward revisions to labor market data, but the initial nonfarm payrolls data were positive.
However, there was concern about the unemployment rate in the initial report, which, at 3.9%, represents the highest reading in over a year.
US Labor Market Data Revisions
Source: Investing.com
The revisions mentioned earlier significantly lowered the results for January and December, shifting the overall tone of the published data slightly pessimistic.
During the recent House of Representatives report, Jerome Powell did not provide specific statements regarding the timing of the first cut, which wasn't surprising.
However, he confirmed that the cycle of hikes is likely over, and the first cuts may be warranted this year.
The market currently anticipates the pivot to begin in June, which, along with central banks' gold accumulation and lingering geopolitical risks, supports the upward scenario.
Real Estate Sector Under Stress Could Force Fed's Hand
One argument for the Fed to start cutting interest rates as soon as possible could be the potential crisis in the commercial real estate market.
From 2012 to 2022, the commercial real estate (CRE) loan market grew from $1.4 trillion to $2.9 trillion. The situation worsened with the pandemic changing work styles, promoting remote and hybrid work, and reducing the demand for office space.
Additionally, the sharp rise in interest rate levels reduced the profitability and attractiveness of borrowed investments in terms of expected cash flow.
While it may be premature to draw exact parallels with the real estate crisis of less than 20 years ago, the Fed is certainly monitoring the situation and should be ready to act, which could benefit gold.
But, Is a Short-Term Pullback Imminent?
The near-vertical increases in gold prices led to new historical highs of around $2200 per ounce.
Currently, the best-case scenario would be a rebound toward the nearest potential support areas.
Gold Price Chart
In this regard, it is worth paying attention to the area around $2150 and $2100, where we can potentially expect a reaction from the demand side.
The most probable scenario remains bullish with further targets in the round number price levels.
Investing.com
