XAU/USD, the trading pair representing gold against the US dollar, achieved a new all-time high above $3,400 on Monday, demonstrating strong bullish momentum. The pair continues to show potential for further advances in the near term, fueled by a combination of factors including the US dollar’s weakness and growing concerns over the US-China trade war and the Federal Reserve’s independence.
On Monday, XAU/USD rallied to a record high of $3,430.36. Like the first rally, this recent, historic rally was propelled by the persistent devaluation of the US dollar. This continuing decrease has driven it down to three-year lows. As investors look for safe-haven assets during this unstable economic period, perfect conditions for gold have developed. Importantly, the daily chart reveals that XAU/USD is trading well above a number of bullish moving averages, reinforcing its bullish momentum.
The technical analysis of XAU/USD indicates that it has space to continue extending its advance. Looking at the 4-hour chart, we can see that the pair has still been biding above crucial key bullish moving averages, suggesting vigorous bulls’ buying close to momentum. The 20 Simple Moving Average (SMA) has skyrocketed up and currently rests at around $3,134. Unlike the current arena $3,320 support, in practice, it offers very flexible support close to the $3,320 level. The significant gap between the price and this moving average emphasizes the strong demand from bullish traders.
XAU/USD support levels are placed at $3,400.00, $3,386.40 and $3,375.50. On the upside, resistance is seen at $3,430.40, $3,445.00, and $3,460.00. Gold may struggle as it nears technical resistance. Its enthusiastic market run is far from over.
Fears worldwide over an escalation of the US-China trade war have added to the gold rally as well. Investors are growing more concerned about the economic fallout from a brewing trade war between the world’s two biggest economic powers. As such, they are investing in gold as a less volatile investment squeezed by the tensions of uncertainty.
Moreover, the push for preemptive cuts in interest rates has become increasingly popular with economic commentators. Donald Trump remarked on the current economic landscape, stating:
“Preemptive cuts in interest rates are being called for by many. With energy costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other ‘things’ trending down, there is virtually no inflation.” – Donald Trump
We greatly appreciate this independent commentary for raising these crucial concerns. Without these measures in place from the Federal Reserve, the US economy will face dark days coming up. The Fed’s independence to conduct monetary policy is under attack. Now that inflationary pressures have largely subsided, the macroeconomic environment favors lower interest rates.