Amidst a backdrop of shifting global dynamics and market speculation, the spot price of gold (XAUUSD) wrapped up another week on a positive note, surging by 4.3% and reaching new heights at $2,330 per ounce. This impressive ascent comes against the backdrop of anticipation surrounding potential rate cuts, geopolitical tensions, and increased speculative activity.
After the Asian markets opened on Monday, the price of gold suddenly surged by almost $30 and hit a new all-time high of $2,354, as traders responded favourably to the People’s Bank of China (PBOC) massive increase in gold purchases. According to a Chinese official’s Sunday announcement, the Chinese central bank bought gold for its reserves in March for the seventeenth consecutive month. According to the official, the PBOC’s holdings of gold increased to 72.74 million fine troy ounces last month.
Ahead of Wednesday’s US Consumer Price Index (CPI), traders are still cautious about whether the gold price will continue its record-breaking climb because they fear that repositioning and profit-taking may take place. Decreased speculation about a US Federal Reserve (Fed) interest rate decrease in June and a de-escalation of geopolitical tensions between Israel and Hamas may also be detrimental to the gold price’s unstoppable upward trajectory.
In a notable turn of events, the probability of a June Federal Reserve rate cut has dwindled from approximately 62% to roughly 48%. This shift comes on the heels of a formidable US labor market report released last Friday, which showcased remarkable strength. The report revealed that the US economy surged ahead by adding 303,000 jobs in March, significantly surpassing expectations of a mere 200,000 job additions, and even outpacing the previous figure of 275,000.
In terms of geopolitics, over the weekend, a number of reports appeared on the wires claiming that teams from Israel and Hamas had traveled to Egypt to continue discussions toward a possible cease-fire that would be reached by Eid al-Fitr.
TECHNICAL ANALYSIS:
The trajectory of the precious metal has been unmistakably upward, tracing its origins to a significant turning point around the $1,614 mark in late 2022. The weekly charts suggest a possible support level around $2,147, though a substantial correction would be required to reach this point. On the daily scale, support is identified at $2,280, with a breach likely leading to further reliance on support at $2,223.
In the shorter term, the H1 chart indicates a prominent support level at $2,304, potentially serving as a crucial floor in the event of a correction this week. Should prices dip further, the daily support at $2,280 becomes pivotal.
Despite indications of the Relative Strength Index (RSI) nearing overbought territory on the weekly chart, and early signs of negative divergence on the daily chart, bullish momentum remains robust. The RSI signals probably won’t cause a complete turnaround, but they might lead to a correction due to profit-taking.
However, any such correction is expected to find support at the aforementioned daily level of $2,280, mitigating the potential for a significant downturn in the gold market. However, if Gold buyers succeed in defying the corrective pressures, a fresh rally toward the $2,370 round figure cannot be ruled out on acceptance above the $2,350 psychological level.
SOURCES:
https://www.nasdaq.com/articles/gold-prices-forecast:-asian-central-bank-buying-fuels-record-surge
