Gold prices held on to their weekly advances in the early hours of Friday, meeting a strong resistance level around the $3,370 level. After a sharp rebound on Thursday, the gold market continued to be strong, remaining steady just under $3,500. In the longer term, trade direction is being driven by the coming United States/Asian allies trade talks, which continue to mold market sentiment. On the other hand, the US dollar is starting to bounce.
With gold prices still around their existing levels, analysts now point to $3,200 as the line in the sand for aqua buyers. If gold can maintain acceptance above the $3,400 level, it may resume its upward trend toward record highs of $3,500. A loss of momentum could see a retest of the 21-day Simple Moving Average (SMA) at $3,175. This is the case particularly if prices start to break down below Wednesday’s low at $3,260.
Central Banks Increasing Gold Reserves
Emerging economies such as China, India, and Turkey have all sharply boosted their gold reserves in recent months. According to data produced by the World Gold Council, central banks were net buyers of a staggering 1,136 tonnes of gold in 2022. That’s assuming all that gold was worth about $70 billion. This figure marks the highest yearly purchase of gold since records began, underscoring a growing trend among these nations to bolster their financial stability through gold accumulation.
Central banks are considering gold as a dependable asset in the context of a changing and uncertain global economic landscape. As geopolitical uncertainties persist, these nations are strategically increasing their reserves to mitigate risks associated with currency volatility and inflation. Gold is becoming a bigger go-to for emerging economies. This trend underscores a major shift in their monetary policies and asset management strategies to shield national interests.
Impact of US Trade Optimism
The US dollar has taken on bullish momentum this week surrounding optimism out of possible trade agreements with Asian nations. Optimistic earnings reports from America’s big tech ballast have given investors cause for bullish exuberance. In consequence, fears of a recession are beginning to fade. On one hand, the strengthening of the dollar is sending concerning signals for gold investors, whomever keeping a close watch on the value of this precious metal.
On Thursday, Japanese Finance Minister Kato Katsunobu held bilateral talks with US Treasury Secretary Scott Bessent in Washington. With these dialogues focusing on further improving bilateral trade relations and increasing economic collaboration between the two countries, this kind of dialogue will set the tone and create positive or negative market momentum. As we move into week’s end, the direction of funds will be key to gold and the US dollar having a friendly or hostile correlation.
Technical Analysis and Market Sentiment
Specifically, the daily technical setup looks quite positive for gold buyers. The key barrier at $3,400 must be surpassed for an uptrend to resume towards the rising trendline resistance at $3,583. Technical analysts say keeping support levels intact is key to keeping bullish momentum going in the gold market.
On the flip side, if bullish progress loses momentum, traders could see a retracement to the 21-day SMA at $3,175. This type of situation would require extreme vigilance in all price action after any sustained moves below $3,260. We’d expect market participants to focus closely on these levels as activity commences today and throughout the day, so stay tuned.