Gold prices hit their highest level in a week during the Asian trading session on Tuesday. This runup attracted dip-buyers galore, who rushed to defend the $4,428–$4,427 area. Gold prices have been increasing on a combination of bullish factors. Dovish expectations from the U.S. Federal Reserve combined with rising global geopolitical risks are sparking the move higher. Consequentially, investors are more often looking to gold as a safe-haven asset during the persistent global uncertainties.
The increase in gold price is one of the strongest reactions towards economic figures and political news seen in a long time. Most encouraging of all, the U.S. Manufacturing Purchasing Managers’ Index (PMI) remained flat at 51.8, suggesting economic expansion continues. Yet even those worries, alongside the recent fears of geopolitical stability and angst regarding domestic monetary policy, have led market participants back to gold’s safe haven.
Central Banks Boost Gold Reserves
2022 saw central banks worldwide increase their reserves by an astounding 1,136 tonnes of gold. At the time, many assumed this addition was worth about $70 billion! This purchase is now the largest annual purchase of gold in records dating back to 1985. It points to a strong trend of central bank distrust, particularly of those from more emerging economies such as China, India and Turkey. These countries are tucking away gold reserves as they face a world of economic sanctions, instability, and uncertainty in search of sound money and security.
Central banks are changing their approach. In doing so, they are coming to understand gold’s important role as a reserve diversifier and protector against future economic shocks. The impulse to act exhibited by many of these institutions exemplifies a larger move toward resilience and risk management amid a more unpredictable world.
Geopolitical Tensions Support Gold Prices
Gold’s bullish trend is additionally supported by increased political risk around the globe. As if the continued chaos in Iran and the extended war in Ukraine aren’t keeping investors worried enough. Consequently, appetite for safe-haven assets is skyrocketing. Growing strife between Saudi Arabia and the United Arab Emirates have further injected instability into the market. Consequently, investors are rushing to gold, looking for a safe haven.
The recent stagnation of the Russia-Ukraine peace negotiations has only added to these worries. Despite furthering efforts at diplomacy, negotiations are still at an impasse, opening the door for even greater escalation across the region to persist. This uncertainty only adds to the allure of gold as a hedge against geopolitical risks.
Technical Indicators Reflect Positive Momentum
On a technical basis, gold’s recent performance is still very much supportive of its positive momentum. The Moving Average Convergence Divergence (MACD) histogram has crossed over into positive territory. It’s creeping up on the one-hour chart, a sign that a potentially bullish trend is shaping up. Traders will be keenly focused on the 100-hour Simple Moving Average (SMA), then at $4,373.28. Instead, they expect it to provide more flexible, market-oriented price support in the short run.
Buyers are pushing through to the market, especially around important support levels. If today’s trends continue, commodities market analysts are saying that gold has more room to climb. Technical indicators and fundamental drivers are all aligning. This combination is undeniably setting up a gold-friendly environment in the near term.