Gold Rush: Reaching New Heights 

Over the last 40 months, gold trading has been rather muted, and the never-ending rate hikes were close to 

breaking investors’ confidence. However, the fundamental backdrop has changed quickly in recent weeks, and 

central banks’ tough talk on higher rates for longer appears to be empty threats.  

One key factor driving the recent gold rally is the significant drop in inflation rates on both sides of the Atlantic. 

For instance, the latest reading shows that Eurozone annual inflation has fallen from over 10% in mid-2022 to 

approximately 2.4%. The sharp drop in inflation has caused traders to pencil in the first ECB rate cut as early as 

April 2024, with possibly three additional rate cuts before 2024 is over.  

US inflation has also been dropping in recent months, and last week, the US PCE annual inflation reading came in 

at 3%. While the US ISM Manufacturing reading was disappointing once again and remained at 46.7, in deep 

contraction mode. The combination of lower inflation and a slower economy is boosting demand for gold as predicted.  

Geopolitical tensions flare up 

Fighting between Israel-Hamas resumed, firmly squashing peace negotiations, and the Houthis, an Iran-backed rebel 

group, attacked the commercial vessels and the US warship Carney as they passed Africa’s horn, heading for the Suez 

Canal.  

H&S patterns suggest a surge to $2540 

An inverse head and shoulders pattern is typically observed when the market is bottoming out. However, over my 17 years 

of trading experience, I have also applied this pattern to situations where the market is trading sideways, as we've seen in 

recent months. This pattern was triggered today when the price surpassed the $2077 level. However, it's important to note 

that the bulls faced rejection despite this trigger, and the price is currently well below that level. 

Nevertheless, today's decline in price wasn't significant enough to signal the end of the short-term trend. As long as the price 

remains above the $2030 mark, there is still a possibility that it might attempt to push above $2077 once more. If it does, the 

next potential target to watch for in the coming months could be $2540 as per the head and shoulders pattern.