Gold prices (XAUUS) continue their ascent, buoyed by escalating geopolitical tensions in the Middle East. The recent drone strikes between Iran and Israel have heightened investor anxiety, driving demand for safe-haven assets like gold. The potential for a wider conflict involving regional powers and the US further strengthens gold’s appeal.
However, the US dollar’s strength, fuelled by robust economic data like stronger-than-expected retail sales, acts as a counterweight to gold’s rise. The Federal Reserve’s hawkish stance on maintaining higher interest rates to combat inflation could temper gold’s gains in the near future. Investors are awaiting Jerome Powell’s speech and upcoming economic data releases for further cues on the Fed’s monetary policy direction.
Technical Analysis
The 4-hour chart shows that gold is trading near its all-time high of $2,431.47, currently positioned at $2,371.85. The price action sits comfortably above the ascending 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), indicating a strong bullish trend.
A break above the all-time high of $2,431.47 could occur if the 20-SMA provides support. Significant volume on a breakout could strengthen the bullish momentum, targeting the 23.60% Fibonacci extension level ($2,470.16) and 38.20% Fibonacci extension level ($2,494.09). A correction below the 20-SMA and 50-SMA could see $2,330.71 as initial support. A sustained move below this level could bring $2,266.02 into play for the bears.
Summary
The geopolitical turmoil in the Middle East is the primary driver behind gold’s current rally. The technical analysis on the 4-hour timeframe suggests a bullish bias with a potential test of the record highs in the near future. However, the US economic data and the Fed’s policy decisions will be crucial factors to watch for any potential reversal in the uptrend.
Sources: TradingView, Trading Economics, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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