Gold Soars, Stocks & Bitcoin Dip, Analysts Warn of Waning Optimism

The optimism driven by the Federal Reserve has helped gold and stock markets reach record highs in the past few days, but began to wane on Friday morning as poor earnings from several companies, including FedEx, put the reality of the economic situation at the forefront of investors' minds, causing asset prices to fall.

David Morrison, Senior Market Analyst at Trade Nation, noted: "The rebound on Thursday led to a 2.5% increase in the Nasdaq index at the close, while the mid-cap Russell 2000 index rose by 2.1%.

The Dow Jones and S&P 500 indices were slightly more restrained, with gains of 1.3% and 1.7% respectively."

"But it was these two indices that set new records, with the Dow Jones closing above 42,000 points for the first time in its long history," he added.

"After the Fed clumsily cut rates by 50 basis points that night, investors had a lot to absorb on Wednesday and not much time to assess it all."

"Stock indices closed slightly down at the end of the trading day.

But yesterday, buyers largely exited the market."

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Before the rate cut, many analysts had warned of the negative effects of a large cut, as history shows that markets often enter a recession after an initial surge of optimism.

Morrison said: "Many people think it was unnecessary to start an easing program for the reason why the Fed decided to do so, and any concerns were put on hold."

"Instead, the feeling is that the first interest rate cut since March 2020, and the possibility of more cuts this year and beyond, has opened the curtain for the strong rebound that many believe could happen before the end of the year.

But are investors getting carried away?

Is there reason to temper the current optimism?

Of course."

He said, "The 50 basis point cut seems to have come out of nowhere.

It was only possible because all the members of the Federal Open Market Committee were in 'stealth' mode and unable to talk publicly about monetary policy just a few days before the meeting.

The recent disappointing employment data initially sparked concerns about a 'hard landing'.

Although in other respects, the U.S. economy seems to be doing well, it is not entirely isolated from the rest of the world."

Morrison emphasized, "Former ECB President Mario Draghi said that China's economy is not in good health, and the EU is rigid and uncompetitive.

Treasury bonds should be a major issue in the U.S. and elsewhere.

However, even with less than six weeks to go before the U.S. presidential election, both candidates completely ignored this point, instead emphasizing how much they are willing to spend, thus exacerbating the problem.

Debt is another day's issue."

He concluded: "For now, it seems that the decline is an opportunity to buy, and new records are calling."

"But for those who are more cautious, a quick downward glance is enough to cause a serious bout of dizziness.

The stock market has risen sharply in a short period of time, so disciplined risk management is more important than ever."

Despite the poor performance in the morning, gold bulls continue to surge into uncharted territory, as gold hit a new high near $2,620 an ounce on Friday, currently trading at $2,613 an ounce, up 1.1% during the session.

Cryptocurrencies also rose overnight, then entered a consolidation period on Friday morning.

Alex Kupcsikevich, Senior Market Analyst at FxPro, said: "Active buying in the cryptocurrency market continues, with its total market capitalization rising by 3.2% in 24 hours to $2.21 trillion, reigniting the battle to break the local high of $2.27 trillion a month ago."

"The local low in early September was higher than the previous low, breaking through the recent high could provide new buying momentum and signal a break in the downtrend that has been going on for months."

He added: "Bitcoin (BTC) broke through $64,000 on Friday morning, quickly approaching the psychologically important 200-day moving average test, which also holds the high of late August."

"Overcoming this resistance will open the way to the upper limit of the down channel at $66,600, and break the downtrend when rising above $68,000."

According to market analyst Daan Crypto Trades, $65,000 is the resistance level that needs to be overcome, which will mark the official return of the bull market.

#Bitcoin's key level is $65,000.

In terms of liquidity, this is a big level, and it will also signal a breakthrough in the bull structure.

After the recent high-low points since the plunge in August, this will lead to higher highs.

For now, September has been a positive month for Bitcoin, with its price currently up nearly 8% since the beginning of the month.

If it can maintain growth, history suggests that October, November, and December will also be positive months.

Currently, Bitcoin is trading at $62,882, down 0.38% on the 24-hour chart.