Gold prices pushed out of Tuesday morning’s recovery rally, looking to recapture the weighty round number of $3,400. Traders across the market are keeping a wary eye on developments, as the two-day U.S. Federal Reserve policy meeting kicks off later today. Optimistic market sentiment Gold is expected to remain strong, continuing the trend seen with the precious metal amidst intensifying geopolitical conflict and a declining U.S. dollar.
The gold price recovered after testing an important support level. The near-term support level is the 21-day Simple Moving Average (SMA), pegged at $3,260 and descending. This support has been essential to establishing them and protecting recent wins. The market’s attention now shifts toward how the Fed’s upcoming decisions will impact gold pricing, with many analysts suggesting a constructive outlook.
Technical Indicators Support Positive Outlook
Small bounce likely with safe haven gold market showing real resiliency. The 14-day Relative Strength Index (RSI) is very strong, remaining well above the midline at about 62. In other words, there’s room to grow and then some. Market analysts think if gold can manage to hold above the $3,400 level it will attract additional buying. This wave of enthusiasm may lead to prices heading in the direction of the prior channel resistance located at $3,467.
Immediate support for gold is now seen at $3,300 should the market pull back. The important 21-day SMA support at $3,260 strengthens the bullish outlook and provides a strong base for further advances. As the gold prices hit their highest annual prices on record, market players continue to have a positive outlook about the precious metal.
“April change in indexes was a reversal of March’s direction.” – Steve Miller
Geopolitical Factors and Central Bank Actions
The bull run in gold prices is unprecedented. Escalating geopolitical tensions, particularly between Israel and Yemeni Houthi rebels, combined with the continued war in Ukraine, are fueling this spike. International and regional actors, and in particular the UN, must now demand that Israel ceases its air operations and violations. This rising geopolitical tension is forcing investors to safe-haven luxuries like gold.
“Israel, reportedly in coordination with the US, launched airstrikes on Yemen’s Hodeidah port in response to Houthi rebel’s ballistic missile attack that hit Ben Gurion International Airport on Sunday.” – FXStreet’s Analyst Haresh Menghani
Emerging economies, led by China, India, and Turkey, are doing their part to drive gold’s upward momentum by adding to their reserves at a torrid pace. In 2022, central banks were net buyers of 1,136 tonnes of gold worth around $70 billion at today’s prices. This trend is a clear sign that there is rising demand for gold as a safe haven asset in this time of global uncertainty.
Economic Indicators Bolster Gold Demand
Recent primary economic data have provided additional bullish boosts to the gold market. According to the Institute for Supply Management’s Services PMI Index, the growth rose from 50.8 in March to 51.6 in April. Improving economic indicators are lending to a positive fundamental gold market, supporting gold up. Investors are no doubt running to gold for protection due to the uncertainty of the U.S. dollar.
With the bearish sentiment towards the dollar deepening by the day, gold prices have shown strength the past two days. Despite some external pressures, buyers have proven themselves to be tenacious and kept the upward momentum going. Analysts are convinced that if this bears out in reality, gold will easily hit and exceed its all-time high ($3,500).