Gold (XAU/USD) is holding its ground near record highs as a mix of Fed rate cut speculation, a soft US Dollar, and heightened geopolitical tensions power safe-haven demand. Weaker US labor market data and softer inflation have eclipsed more robust inflation, underpinning expectations for sharp policy easing by the Federal Reserve, and increased political instability in France and Japan, rising Russia-Ukraine tensions, and Middle East unrest further add to the attractions of gold. In spite of overbought sentiment and bullish market tone capping aggressive purchases, the metal is poised for a fourth straight week of robust gains, with the potential for further gains to $3,700.
KEY LOOKOUTS
• Three rate cuts this year are fully priced in by markets, beginning with a 25 bps cut next FOMC meeting.
• USD stays down at multi-month lows as Treasury yields fall to five-month low, underpinning gold prices.
• Safe-haven demand is fueled by rising tensions from Russia-Ukraine conflict, Middle East instability, and fresh trade sanctions.
• Major resistance is at $3,675–$3,700, with short-term support at $3,630 and more heavily at $3,580–$3,560.
Prices for gold are remaining close to historic highs as investors persist in preferring the metal against the backdrop of anticipated multiple cuts in Fed rates and continued geopolitical tensions. Weaker than expected US labor market data strengthened the argument for drastic monetary easing, keeping the US Dollar weak and Treasury yields at multi-month lows that in turn support non-yielding gold. Rising tensions in Russia and Ukraine, political upheavals in Europe and Asia, and continuing trade frictions also add to the metal’s safe-haven attraction. In spite of overbought technical levels, the overall outlook is bullish, and gold is headed for its fourth straight week of gains.
Gold remains near record levels as Fed rate cut expectations and a soft US Dollar fuel safe-haven demand. Increasing geopolitical tensions and trade-related uncertainties additionally support the bullish momentum, keeping the metal headed for weekly gains.
• Gold (XAU/USD) remains near record levels on the back of Fed rate cut expectations.
• Mild US labor market indicators have taken attention away from high inflation readings, adding to policy easing speculation.
• Three Fed rate cuts are being priced in this year, beginning at the next FOMC meeting.
• US Dollar is at multi-month lows as Treasury yields reach a five-month trough.
• Geopolitical tensions from Russia-Ukraine conflict, Middle East unrest, political instability in France and Japan enhance safe-haven demand.
• Technical analysis indicates resistance at $3,675–$3,700 and support at $3,630–$3,580 levels.
• Gold is poised for its fourth straight week of solid gains on the back of overbought levels.
Gold remains in high demand with investors as hopes for several Federal Reserve rate reductions linger strongly on the US Dollar and underpin demand for the haven metal. Weaker US labor market reports have overshadowed stronger inflation reports to further cement the argument for aggressive monetary easing throughout the year. With Treasury yields trending downward to multi-month lows, the non-yielding yellow metal is still a popular choice for investors looking for stability in uncertain times.
XAU/USD DAILY CHART PRICE
SOURCE: TradingView
In addition to monetary policy, increasing geopolitical tensions and political uncertainty in major economies further increase gold’s appeal. The Russia-Ukraine war, continuing instability in the Middle East, and trade pressures on international markets have all contributed to safe-haven inflows. Furthermore, political unrest in France and Japan contribute to the uncertain environment, making gold a choice asset for risk-shy investors and keeping sentiment decidedly supportive.
TECHNICAL ANALYSIS
Gold holds a bullish setup by trading near all-time highs, although overbought daily Relative Strength Index (RSI) readings warrant caution. Near-term resistance is in the $3,657–$3,675 area, with a broken trendline above opening the door for the psychological $3,700 level. On the flip side, near support is at $3,630, and then at $3,612 and $3,600, which are solid cushions, which, if broken, might initiate a bigger correction towards the $3,580–$3,560 area. Technically, the outlook remains positive for buyers as long as gold remains above its crucial support levels.
FORECAST
Gold is well-placed to carry on with its rally as Fed rate cut hopes, muted US Dollar, and geopolitical tensions continue to present a favorable situation. A clean break above the $3,675–$3,700 level may pave the way for new all-time highs, with momentum propelling prices towards the $3,720–$3,750 level. Safe-haven demand, along with continued US yield weakness, is set to support bullish sentiment in the short term.
Conversely, overbought technical levels and an overall upbeat risk sentiment may cap aggressive purchases, prompting profit-taking in the near term. Gold may test lower levels at $3,600 and $3,580 if it falls below the $3,630 support level, with a deeper correction laying bare the $3,560–$3,510 area. Although the underlying picture is favorable, short-term declines cannot be discounted as investors book profits following recent record prices.
