- Since the start of trading this week, gold prices have retreated from their record high set on Friday, when they climbed towards the $2,431 an ounce resistance level.
- Amidst profit-taking, gold prices fell to $2,324 an ounce but quickly resumed their broader upward trend.
- Prices are gaining ground towards the $2,398 an ounce resistance level, testing a rise fueled in part by the risk of an all-out conflict between Israel and Iran.
Recently, Israeli military officials have said they have no choice but to respond to Tehran's attack, even as the United States and Europe have urged restraint. Obviously, the tensions have helped bullion prices gain 1.7% at the start of the week, adding to a rally that has seen it jump by a fifth since mid-February.
The so-called "fear gauge" in Wall Street markets - the Chicago Board Options Exchange Volatility Index - has risen by more than a quarter over Friday and Monday to its highest level since late October, after several weeks of Hamas' initial attack on Israel.
According to gold trading platforms, gold prices have risen even as the Federal Reserve has delayed cutting US interest rates, a headwind for gold, which does not pay interest. There is growing evidence that the traditional inverse relationship between bullion and real US interest rates is breaking down. This phenomenon was evident on Monday, as gold shrugged off the rise in Treasury yields, which would normally be a headwind. Instead, bullion prices were supported by other long-term support - including strong buying by global central banks, rising demand from Chinese consumers, and heightened geopolitical risks.
In this regard, the Reserve Bank of India continued its gold purchases in March, according to Krishnan Jhalani, investment research analyst at the World Gold Council, who published on the X site. He added that year-to-date purchases of around 19 tons now exceed its net purchases for 2023 of 16 tons.
Looking ahead to gold prices, Citigroup said in a note that it had raised its 2024 gold forecast to $2,350 an ounce and made a "huge upward revision of 40%" to its 2025 forecast to $2,875. Obviously, this came after Goldman Sachs Group said on Friday that the metal was in "an unshakeable bull market," raising its year-end forecast to $2,700.
The future of Fed policy has an impact on the gold price... Fed Chairman Jerome Powell said during a panel discussion at the Wilson Center in Washington alongside Bank of Canada Governor Macklem that recent inflation data suggests the Fed may need more time to feel comfortable cutting interest rates. Powell added: "It's clear that the recent economic data has not given us more confidence, and instead suggests that it is likely to take longer than expected to achieve that confidence." He added, "Given the strength of the labor market and the progress on inflation so far, it is appropriate to allow restrictive policy more time to work and allow the data and evolving expectations to guide us."
Eventually, this suggests that Fed officials do not feel an urgent need to cut interest rates and means that any rate cuts in 2024 could come towards the end of the year, if at all.
Gold Price Forecast and Analysis Today:
The factors supporting gold prices remain intact and expanding, thus the upward trend is expected to continue. Any price retracement may be temporary. Furthermore, the geopolitical tensions are widening, and central banks' purchases of gold have not ceased. It is anticipated that new record highs will be reached if stability returns above the resistance level of $2400 per ounce. Currently, the nearest support levels for gold are $2375, $2360, and $2330 per ounce.
Technically, the recent gains in gold have been sufficient to push all technical indicators towards strong buying saturation levels, and if the factors driving its gains were to cease, selling pressure on gold may intensify at any time. Ultimately, a downward trend reversal will not occur without a move towards the psychological level of $2000 per ounce again.
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