Record Withdrawals from Shanghai Gold Exchange Indicate Strong Demand

Gold has reached a new record high, hitting $2,740, and is currently trading around $2,733. Demand has surged, particularly reflected in withdrawals from the Shanghai Gold Exchange, which jumped to 118 tonnes in September—a rise of 11% from the prior month. This increase is largely attributed to jewelers preparing for the National Day Holiday sales in early October. Analysts expect that government support and improving economic conditions could enhance consumer confidence, driving further growth in both investment and jewelry demand as the year progresses.

On the monetary policy front, the European Central Bank's (ECB) strategy to lower interest rates is seen as beneficial for gold prices. Generally, when interest rates are low, gold becomes a more appealing option as it doesn't yield interest, making it preferable compared to interest-earning assets.

The US dollar index has experienced a slight decline due to profit-taking; however, if it breaks above the 104 mark, this could signal the continuation of a bullish trend. According to the CME FedWatch Tool, the likelihood of a 25 basis point interest rate cut in November has decreased to 87%, down from 97% just a week ago.

From a technical standpoint, on the 4-hour chart, gold is trading above both short-term and long-term moving averages. Immediate support is around $2,700; falling below this level could target $2,685, $2,670, $2,660, or $2,638. A significant bearish trend would only emerge if prices drop below $2,470. On the upside, minor resistance is located around $2,739, and breaking through this could push the price to the next targets of $2,750 and $2,775.

Indicators on the 4-hour chart show bullish signals: the Commodity Channel Index (CCI) is bullish, and the Average Directional Movement Index (ADX) also indicates a bullish trend.

Therefore, it may be a good strategy to buy on dips near $2,700, with a stop-loss set at around $2,670 and a target price of approximately $2,759.