- At the beginning of this week’s trading, the price of gold rose by up to 1.4% to a new historical record level of $2,450 per ounce.
- According to the platforms of gold trading companies, it was then exposed to profit-taking selling operations, reaching the level of $2,406 in morning trading today before settling around the level of $2,425 per ounce at the time of writing the analysis.
Its gains were driven by growing optimism that the Federal Reserve will cut US interest rates soon and increasing demand for safe haven assets amid the potential escalation of geopolitical tensions. Moreover, Iranian President Ebrahim Raisi was killed in a helicopter crash, sparking political uncertainty in the Middle East.
Meanwhile, Saudi Crown Prince Mohammed bin Salman postponed a trip to Japan due to King Salman's health. Last week, economic data that showed signs of slowing consumer inflation in the United States of America and a halt in retail sales gave the Federal Reserve more room to begin easing monetary restrictions. In general, the markets are already betting that the first-tier downgrade will occur in September. Investors will receive further signals from several Fed officials scheduled to speak this week.
In addition, aggressive purchases by global central banks, especially by China, which is seeking to reduce its dependence on the US dollar, have further supported this trend.
In general, traders have increased their bets in recent sessions that the US Federal Reserve may reduce borrowing costs as early as September, a scenario that would boost gold because it does not pay interest. Last week, the US dollar fell, and Treasury bond yields rose after data released last Wednesday showed that US inflation in April fell more than expected. This provided support to the precious metal, which is priced in dollars.
The metal's safe-haven status was in the spotlight after a helicopter carrying Iranian President Ebrahim Raisi crashed in heavy fog on Sunday. Consequently, this news heightened the sense of heightened geopolitical risks across the region after an oil tanker bound for China was hit by a Houthi missile in the Red Sea on Saturday.
Overall, hedge fund trading in COMEX futures boosted bullish bets on gold to a three-week high in the week ending May 14, according to data from the Commodity Futures Trading Commission. Furthermore, the gains indicate that bullion prices have broken out of a somewhat narrow trading range in recent weeks amid lack of clarity on the path of the US interest rate. Prices are about 20% higher this year.
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Gold's strength has been linked to central bank purchases, strong demand from Asia - especially China, and rising geopolitical tensions in Ukraine and the Middle East.
Also in the metals market, silver prices rose to their highest levels since December 2012 after a strong rise on Friday, supported by indirect sentiment in the broader physical metals markets, as tightening supply stimulated investor demand for materials such as copper. Unlike gold, white metal is also considered an industrial commodity due to its use in products such as solar panels.
According to the platforms of currency trading companies, the US dollar index stabilized around the 104.5 level on Monday, as investors continued to evaluate the Federal Reserve’s monetary policy expectations, while awaiting more US economic data this week for further signals. Last week, the index lost nearly 1% as signs of slowing inflation in the United States reinforced bets that the US central bank will begin a policy easing cycle this year. Data released last Wednesday showed that US consumer inflation data was in line with expectations in April but was lower than the previous month. Meanwhile, a group of Federal Reserve officials called for caution before moving to lower interest rates. Currently, the Investors are looking to the minutes of the Fed's May 1 decision on Wednesday for further guidance. In general, the dollar remained stable in all areas, but continued to rise against the yuan as the People's Bank of China kept key lending rates unchanged.
Gold Price Forecast and Analysis Today:
Based on the performance on the daily chart above, the price of gold is in a strong and sharp upward trend. Investors seem unconcerned about all technical indicators reaching strong overbought levels, focusing instead on the continued factors driving gold's gains. As a result, the price of gold could move to new record levels, with the closest resistance being $2500 per ounce if it manages to break through the recent historical resistance at $2450 per ounce. However, caution is advised as profit-taking selloffs could occur at any time, especially if global geopolitical tensions ease and the US dollar rises again.
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