As noted above, on Wednesday gold (XAU/USD) blasted to a new all-time high at nearly $4,866. Investors rushed to safe-haven assets as a mood of global risk-off established itself. Palladium had already traded up higher earlier during the European trading session, peaking at a remarkable $4,888. This bullish momentum was recently exemplified by its successful breach of the 2000 milestone. Just this week, gold has increased over 6% due to increased demand and market uncertainty.
As we noted in a previous piece, central banks around the world have been a major force pushing gold prices higher. Last year alone, they increased their reserves by 1,136 tonnes of gold, worth approximately $70 billion. This trend of accumulation further highlights the continued allure of gold as a stable investment amid increasingly uncertain economic times.
Gold too has had a monster year and clearly the current upward trend has no sign of stopping. Analysts note that a sustained move above the upper band at approximately $4,868.15 could pave the way for prices to exceed $4,900. As market conditions change, some analysts are even predicting that gold might be worth as much as $5,000.
Factors Driving Gold’s Rally
There are a variety of reasons behind gold’s incredible ascent. And now investors are rushing to gold. As such, combined with the current geopolitical tensions and economic uncertainties, it has proven to be a reliable store of value. The significance of the trend is undisputable. In addition, the Average Directional Index (ADX) has blasted up to 42, indicating extremely strong momentum is present in the market.
Moreover, technical indicators point to continued strength. The 20-period Simple Moving Average (SMA) contained by the Bollinger Bands for gold is pointing upwards. Adding to this trend is the fact that the upward momentum could have legs. This middle band, located at around $4699.64, serves as the first line of support for gold prices. At the same time, the lower Bollinger Band, which is near $4,531.13, acts as another significant level of support.
So long as gold can stay above this lower band, the wider bullish bias should continue to stay strong. The buyers have persisted, even as the metal has become more and more overbought, reflecting the profound bullish sentiment among investors about the metal’s inevitable out-performance.
Future Outlook for Gold
As gold finds its footing in uncharted waters, analysts stay positive on what direction it could take. News reports say that the asset needs to maintain support above important support levels. If so, it may be on track to set more record highs in the weeks ahead.
Investors and market watchers alike are looking for the earliest of peeks behind the curtain to signal that a change in tenor is afoot. Gold is going to continue to rise with the current trend, that’s a given. This is bound to occur as long as global uncertainties persist and central banks continue to prop up precious metals.
“A deal is reached for the complete and total purchase of Greenland.” – US President Donald Trump
This statement reflects the complex dynamics influencing global markets and adds another layer of uncertainty that could further bolster gold’s appeal.
Precursors of Tensions
Geopolitical risks are as high as they’ve ever been. For this reason, many investors are flocking to gold to safeguard their portfolios.