GOLD PRICE GAINS MOMENTUM AMIDST GEOPOLITICAL TURMOIL

In the world of finance, GOLD has always been a barometer of uncertainty, and recent events have once again proven this. The gold price (XAU/USD) is on the rise, and it’s not by mere chance. In this article, we dive into the factors influencing the surge in gold prices, technical analysis and what investors should keep an eye on.

GEOPOLITICAL TENSIONS IN THE MIDDLE EAST

One of the primary drivers behind the uptick in gold prices is the escalating geopolitical tensions in the Middle East. The tragic killing of three US Army soldiers in a drone attack by Iran-backed militant groups has sent shockwaves through the region.

The incident further raises concerns about the potential for further escalation, and investors are turning to gold as a safe-haven asset in uncertain times. This shift in sentiment is evident in the weaker tone observed in equity markets, highlighting gold’s role as a store of value during geopolitical turmoil.

DECLINING US BOND YIELDS

Another significant factor contributing to the rise in gold prices is the sliding US bond yields. As investors seek safety amidst geopolitical uncertainties, they are moving towards bonds, causing yields to drop. Interestingly, this flight to safety hasn’t translated into a stronger US Dollar (USD).

The US Dollar remains within a trading range, providing additional support for gold. This trend showcases the intricate relationship between gold and bond yields, where lower yields often benefit the precious metal.

FEDERAL RESERVE’S MONETARY POLICY OUTLOOK

While gold is basking in the current geopolitical climate, it’s worth noting that there are limitations to its upward trajectory. The Federal Reserve (Fed) plays a pivotal role in shaping gold’s future. As of now, there are diminishing odds of a more aggressive policy easing by the Fed in 2024. This caps the upside potential for gold, as it is a non-yielding asset. Investors are cautious, awaiting the outcome of the crucial two-day Federal Open Market Committee (FOMC) monetary policy meeting scheduled for Wednesday. The Fed’s decisions will undoubtedly have a significant impact on gold’s future performance.

TECHNICAL ANALYSIS: KEY LEVELS TO WATCH

From a technical perspective, the gold price faces resistance from some critical levels. It currently hovers below the 50-day Simple Moving Average (SMA), which stands around the $2,027-2,028 region. Breaking through this SMA could attract more buyers, potentially leading to a short-covering rally. If this rally sustains, gold could aim for the $2,077 intermediate hurdle, setting its sights on the coveted $2,100 mark.

On the flip side, immediate support is identified near the $2,012-2,010 area, followed by the psychological barrier at $2,000. A breach of these levels may trigger further selling pressure, exposing the 100-day SMA around $1,977-1,976. The ultimate test for gold would be the crucial 200-day SMA, located near the $1,964-1,963 region.

It is important to mention that gold has been trading below EMA21 on a daily timeframe.

In conclusion, gold’s recent surge is a result of a delicate interplay between geopolitical tensions, declining bond yields, and the Federal Reserve’s monetary policy. As we navigate these uncertain waters, keeping a close eye on these factors and technical levels is essential for both traders and investors in the precious metal market.

GOLD SPOT/ US DOLLAR (XAUUSD) posted an intraday high of $2030.68 and an intraday low of $2018.38. XAUUSD is currently trading at $2030.45 on Monday, January 29, 2024 at 12:10Pm Pakistan Time.

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XAUUSD_2024-01-29_12-09-29

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