Gold prices remain near all-time high

Gold prices rose to an all-time high of 2,190 per ounce on Friday. Gold prices remained firm on Monday, trading above 2,180 per ounce. If gold prices increase, resistance may be encountered at the psychological level of $2,200 per ounce, while if gold prices decline, support may be encountered near $2,025 per ounce. 

Gold prices have experienced a meteoric rise since last week and are trading in overbought territory. The dollar’s decline and the rise in demand for safe-haven assets due to the war in Gaza have propelled gold prices upward. Gold prices remained strong on Monday, even as the US dollar and treasury yields rallied.

Rising geopolitical tensions propped up gold prices, which raised 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. The war between Israel and Hamas is threatening to spill over the Middle East as tensions rise in the Red Sea area.

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 rallied on Monday, with the dollar index climbing to the 102.9 level. US treasury yields also gained strength, with the US 10-year bond yielding approximately 4.10%.    

Gold prices have also been influenced by US fundamentals. Last week’s data revealed that the US economy is not as robust as previously anticipated. Rising concerns about the health of the US economy weighed down the dollar and propelled the safe-haven gold upwards. 

The Fed kept interest rates unchanged at its latest monetary policy meeting within a target range of 5.25% to 5.50%. The Fed, however, has removed the tightening bias from its policy statement, indicating that the central bank is preparing to pivot to a less restrictive monetary policy, boosting gold prices.

Fed rate cut expectations are affecting gold prices. Odds of a rate cut in March are practically nil. Rate cut odds in May are also down to 20% and only 25 basis points of rate cuts are priced in by May, against 25-50 bp before. Market expectations of rate cuts are becoming more moderate as policymakers have stated that they intend to start reducing interest rates slowly.

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Written by:
Myrsini Giannouli

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