Gold’s meteoric rise continues

Gold prices have been hitting new all-time highs in the past couple of weeks. Gold prices rose to a fresh all-time on Monday, touching $2,350 per ounce. If gold prices increase, resistance may be encountered at the psychological level of $2,400 per ounce again, while if gold prices decline, support may be encountered near $2,270 per ounce. 

Gold prices have experienced a meteoric rise recently and are trading in overbought territory. Gold prices have been benefiting from increased geopolitical risks, as well as from the rivaling dollar’s weakness. Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar dipped on Monday, with the dollar index dropping below the 104.2 level. On the other hand, US treasury yields gained strength with the US 10-year bond yielding approximately 4.43 by the end of the week. 

The US Federal Reserve kept interest rates unchanged at its latest policy meeting within a target range of 5.25% to 5.50%. The Fed’s forward guidance was overall dovish, boosting gold prices. For months now, markets have been speculating as to the timeline of the Fed’s pivot to a more dovish policy. Fed officials wish to see more evidence of disinflation before moving ahead with cutting interest rates. 

Fed rate cut expectations are affecting gold prices. Odds of a rate cut in May are practically nil. Rate cut odds in June are down to 50% and only 25 basis points of rate cuts are priced in by June. Market expectations of rate cuts are becoming more moderate as policymakers have stated that they intend to start reducing interest rates slowly. 

Gold prices are propped up by rising geopolitical tensions, which raise the appeal of safe-haven assets. Concerns that the Geopolitical crisis in the Gaza area may spread to neighboring countries are raising demand for safe-haven assets, boosting gold prices. Over the weekend, however, there were signs of de-escalation. Peace talks are underway in Egypt and Israel removed troops from Southern Gaza. The ongoing conflict between Russia and Ukraine is also propping up gold prices. Ukrainian drones have recently attacked one of Russia’s largest oil refineries, reportedly causing the loss of Russian refinery capacity.

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Written by:
Myrsini Giannouli

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