Gold prices (XAU/USD) take the lead on a powerful recovery. Just since late yesterday afternoon, they have jumped up and over the $3,300 level during the Asian session at the open of a new trading week. Recognizing the recovery that is so clearly present and alive today is just the first step. After a huge turnaround of Friday’s losses, the precious metal is turning bullish. Recent upward momentum bolstered quickly on the heels of rising geopolitical tensions and central bank buying. Further adding to this trend is market sentiment surrounding U.S. fiscal policy.
As the market opened up on Monday, gold picked up momentum and traded above key resistance levels. Traders and analysts alike are pointing to the 200-period Exponential Moving Average (EMA) signal on the 4-hour chart. Since then, it has emerged as key support. A sustained strength above this EMA might be a clear indication of a new bullish trend of gold prices, drawing more buying appetite.
Analyzing Recent Price Movements
The gold market recovered from Friday’s losses. More recently, it put in a valiant effort to restore its status over the key $3,300 level. Specifically, there was a strong resistance at the $3,326 to $3,328 supply zone. Gold prices are surging to new highs. If they continue this momentum, they will be on their way to a next big resistance area of $3,432-$3,434.
Therefore market observers think that it’s very important to break through that $3,345 to $3,350 resistance level. If so, we could see a very concerted effort to recapture the $3,400 level. This possible upside movement could bring even more demand from investors looking for safe-haven assets in a time of continued uncertainty.
Gold prices are another story – traditionally seen as a hedge against inflation and geopolitical instability. Given recent events, curiosity about gold as a stable, safe haven investment has grown tremendously. Fueling this demand is both the continuing Russia-Ukraine war and escalating tensions in the Middle East. Renewed trade tensions between the United States and China are adding to that uncertainty. This atmosphere of uncertainty is pushing gold prices higher.
Central Bank Activities Bolster Demand
Emerging economies, particularly China, India, and Turkey, have been significantly increasing their gold reserves in response to global economic uncertainties. 2022 saw a bold strategic unmistakable pivot as central banks collectively acquired a stunning 1,136 tonnes of gold. This gold was worth about $70 billion, which makes it the largest annual purchase ever recorded. This recent increase in demand from central banks supports a longer-term strategic pivot toward gold as a protector against economic uncertainty.
At the same time, these countries are engaged in a significant gold-buying binge. This marks a deep commitment to increasing disaster resilience in a time of tremendous global uncertainty. This trend, in addition to providing a boost to gold prices in the short term, indicates an overall confidence in gold’s long-term value as an asset.
Market Sentiment and Future Outlook
Geopolitical factors and central bank buying certainly are crucial, but they’re not the whole story. Market sentiment regarding U.S. fiscal policy plays a major role in bullish or bearish gold sentiment. Fears for U.S. fiscal equilibrium have taken root. That’s why the recent speculation about possible upcoming Federal Reserve rate cuts have left U.S. dollar bulls on the defensive. The consequent weakness of the dollar is highly stimulative and drives up gold prices. That’s because, historically, gold tends to move counter to the currency.
Traders and investors are watching for retracements in gold prices. Analysts believe that a drop under the $3,300 mark may discover help around the $3,280-$3,278 area. Drops toward the $3,258-$3,257 support levels may attract buyers. Participants in the market have the opportunity to take advantage of this opportunity to profit from these short-lived corrections.