- At the start of trading this week, gold traded below the new high it hit last week, even after Iran's unprecedented attack on Israel over the weekend.
- According to gold trading company platforms, gold prices rose by up to 1.2% as the conflict in the Middle East entered a new dangerous phase, before erasing most of that gain.
- Temporarily, gold prices retreated yesterday to the support level of $2324 an ounce before quickly rebounding above the resistance level of $2392 an ounce at the start of trading on Tuesday.
According to the events affecting the markets, Iran launched more than 300 drones and missiles against Israel, although most of them were intercepted and no casualties were reported. Before that, gold prices broke above $2,400 an ounce on Friday, but closed the session lower as technical indicators suggested the rally was too hot and investors were taking profits.
Then recent developments in the Middle East have rekindled the flight to gold as a safe haven, with fears of potential Israeli retaliation likely to support gold in the near term. Commenting on the performance and influencing factors, Chris Weston, head of research at Pepperstone Group Ltd, said that the escalating tensions in the Middle East are "a reason in itself to buy gold". He added, "There is a significant geopolitical premium being priced into the moves," adding that the average and the longer-term path is likely to be higher.
Overall, gold prices have risen by about 20% since mid-February in a rally that has surprised many investors. Swap markets indicate that investors have lowered their expectations for the range and pace of Federal Reserve rate cuts this year. Usually, this is a headwind for bullion, as it does not pay interest. However, gold prices have been supported by other factors, including strong buying by central banks and rising demand from Chinese consumers. The increased geopolitical risks in the Middle East and Ukraine have also enhanced the metal's appeal as a safe haven.
A number of Wall Street banks have also recently raised their gold price forecasts, with Goldman Sachs Group on Monday raising its year-end forecast to $2,700 an ounce. The bank said that the Federal Reserve's rate cuts due this year will add to the upward momentum for gold.
Other factors influencing gold
The yield on the 10-year US Treasury rose above 4.6% in April, its highest level in five months, as further evidence of the resilience of the US economy led to a decline in demand for bonds due to a decline in geopolitical concerns. New data showed that US retail sales rose 0.7% from the previous month in March, well above market expectations of 0.3%, while those excluding autos rose to their highest level in 14 months.
Overall, the result also contributed to the macroeconomic backdrop that calls for a delay in the rate cuts that the Federal Reserve has previously indicated, adding to the strong US jobs report and hot inflation points for this period. As a result, futures contracts show that a slight majority of the market expects the US central bank to start easing monetary policy in September only, while nearly 20% are preparing for no rate cuts at all this year.
In addition, statements of no further escalation from the Iranian and Israeli authorities have weakened demand for sovereign debt.
Gold Price Forecast and Analysis Today:
Despite recent selling, the overall trend for the price of gold remains upward. This may continue as long as global geopolitical tensions escalate alongside increased purchases of the yellow metal by central banks for hedging purposes. Therefore, it is expected that the price of gold will move towards new record levels, with the recent gains in the US dollar acting as a temporary obstacle to that. Currently, the nearest resistance levels for gold are $2400, $2440, and $2500 respectively. A reversal of the trend is unlikely based on the performance on the daily chart above without moving towards the $2000 level per ounce.
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