- During last week's trading sessions, the price of gold finally surpassed the $2200 resistance level for the first time.
- Gains extended to reach the all-time high resistance level of $2222 per ounce for the yellow metal.
- Clearly, this came after the Federal Reserve indicated that it would proceed with three interest rate cuts in 2024 despite rising inflation.
What is the reason for the rise in gold prices?
The recent rise in the gold price, which began in mid-February, is driven by long-term tailwinds including rising geopolitical risks and increased buying by global central banks. This month alone, the safe-haven metal has hit new record highs on five occasions. Its rapid rise, according to Bloomberg columnists, has surprised many seasoned market watchers, as there was no clear catalyst. What has been driving bullion prices in part is the expectation of a more dovish monetary policy in the United States, which the Federal Reserve has now confirmed.
Last week, US Federal Reserve Chairman Jerome Powell continued to highlight officials' desire to see more evidence of falling prices, but "it remains likely in most people's eyes that we will achieve that confidence and there will be interest rate cuts."
According to analysts, what was issued by the US Central Bank is the green light for gold traders to return. Also, the US Federal Reserve said that they are currently tolerant of the inflation that we have witnessed, and that they are tolerant that the strength of the labor market will not be an obstacle.”
Furthermore, perhaps speculation about the timing of the Fed's long-awaited pivot has provided the trigger for the recent gains, with data showing that traders boosted their net long positions in gold in the week ended March 5 by the most since 2019. Moreover, the yellow metal is expected to benefit further when US interest rates do fall, as bullion-backed ETFs are likely to increase their holdings, according to UBS Group.
On the geopolitical front, there are a number of risks that are boosting the appeal of gold as a safe haven: Russia appears to have gained the upper hand in its war in Ukraine, the conflict between Israel and Hamas continues unabated, and has led to a redirection of global finance and shipping. Also, the US presidential election later this year could be of major importance to the markets. Chinese buying has helped to support prices as well. In addition to central bank policy, people are stocking up on coins, bullion, and jewelry to protect their wealth from the country's years-long real estate slump and stock market losses.
Gold Price Forecast and Analysis Today:
The general trend of the gold price remains upward, and a first break of the trend will not occur without moving towards the support levels of $2100 and $2050 per ounce. Gold price gains around and above the resistance of $2200 have moved all technical indicators towards strong buying saturation levels. Therefore, caution and good monitoring are necessary when considering buying gold from those peaks. Furthermore, we expect a week of trading in narrow ranges for the gold price until the reaction of the markets and the US dollar price to the announcement of the preferred inflation reading of the US Federal Reserve.
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