Gold prices have reached a new all-time peak during the Asian session on Tuesday, driven by a combination of global economic factors and geopolitical tensions. The US Dollar has found its footing amidst risk aversion, contributing to the rise in gold prices. As traders look ahead to the US economic docket and potential interest rate changes, the market dynamics remain complex. Meanwhile, central banks around the world continue to increase their gold reserves, further influencing the precious metal's value.
US Dollar Recovery and Market Dynamics
The US Dollar has managed a slight recovery from its lowest level since October 2024, touched on Monday. This rebound is attributed to repositioning trades ahead of the two-day Federal Open Market Committee (FOMC) policy meeting starting this Tuesday. The anticipation of this meeting, along with risk aversion in global markets, has provided support for the US Dollar. This recovery acts as a tailwind for gold, as it tends to rise with lower interest rates. However, higher borrowing costs generally weigh down on the yellow metal.
Traders are keenly observing the upcoming US economic data releases, including Building Permits, Housing Starts, and Industrial Production figures. These indicators are expected to provide insights into the economic landscape and influence future monetary policy decisions. The US Census Bureau recently reported that US Retail Sales rose by 0.2% in February, a positive shift from the previous month's 1.2% decline.
Technical Analysis and Gold Price Movements
The daily Relative Strength Index (RSI) on the gold chart has started to indicate slightly overbought conditions. Despite this, gold prices have climbed to a fresh all-time peak during the Asian session on Tuesday. The immediate support level for gold is seen at $2,980-2,978, which could present a buying opportunity for traders. However, resistance is expected near the $2,956 breakpoint. A convincing break below this level might trigger technical selling, potentially dragging gold prices to the $2,930-2,928 horizontal zone and possibly to the $2,900 round figure. Last week's swing low around the $2,880 region remains a critical point of consideration.
The potential for changes in US interest rates is another factor influencing gold prices. Fed funds futures suggest that the Federal Reserve could lower borrowing costs by 25 basis points at its June, July, and October meetings. Such decisions would likely impact the attractiveness of gold as an investment.
Global Geopolitical Tensions and Central Bank Reserves
Geopolitical tensions have also played a role in driving gold prices higher. The Israel Defense Forces (IDF) announced extensive strikes in the Gaza Strip, targeting what they referred to as "terror targets" belonging to Hamas. Such conflicts often lead investors to seek safe-haven assets like gold.
Central banks continue to be significant players in the gold market. As the largest holders of gold globally, central banks from emerging economies such as China, India, and Turkey are rapidly increasing their reserves. According to the World Gold Council, central banks added 1,136 tonnes of gold worth approximately $70 billion to their reserves in 2022. This trend underscores the strategic importance of gold as a financial asset amid economic uncertainties.