Gold prices remain resistant near the all-time high of $4,600. This high was tagged overnight during the Asian trading session on Tuesday. This comes on the heels of a massive industry consolidation earlier this week. It was exacerbated by increasing geopolitical discord and a criminal investigation into Federal Reserve Chair Jerome Powell initiated by the Trump administration. Given the near-term, investors are keenly focused on tomorrow’s US Consumer Price Index (CPI) report. Looking ahead, analysts are saying gold’s future path is bright, and any future dips they view as excellent buying opportunities.
In addition, at the start of the week, gold prices surged to a record high. This increase is a result of the market’s adaptation to a number of outside forces. The still-ongoing investigation into Powell’s actions has added doubt into the equation, sending traders and market participants scurrying to safe-haven assets such as gold. Furthermore, Trump’s recent threats of military action in response to unrest in Iran have heightened geopolitical tensions, further influencing gold’s appeal.
Factors Influencing Gold Prices
Gold is further building on its recent momentum, fueled by fundamental developments such as geopolitical instability. Central banks are on a buying spree themselves, which further strengthens gold’s demand. The 50-day Simple Moving Average (SMA) for gold is currently at $4,255.80, which serves as a key support level for prices. As long as gold is staying above this SMA, it’s maintaining bullish market control.
The Moving Average Convergence Divergence (MACD) momentum indicator remains well above zero. This event is continuing to add to the bullish sentiment which gold has been enjoying lately. Analysts are cautioning that that momentum could lose steam in the short term. The RSI (Relative Strength Index) indicates that gold is currently in overbought territory. Such overbought condition may bring about some near-term corrective pullbacks, which in turn would be seen as buying opportunities by investors.
Besides these technical indicators, geopolitical risks continue providing firm support to gold prices. Recent conflicts such as the US invasion of Venezuela and the continued invasion of Russia to Ukraine are further increasing global demand for gold. Americans are investing in gold as an insurance policy against instability. Humans have an ingrained tendency to reach for gold in times of uncertainty—making it a powerful competitor in the financial market.
Central Banks Boosting Gold Reserves
The second major factor in gold’s strength has undoubtedly been the record central bank buying we’ve seen throughout the world. In just 2022, central banks injected an estimated $70 billion into the gold market through adding 1,136 tonnes of gold to their reserves. That makes it the largest annual bullion purchase of gold since 1950. It’s important to point out that emerging economies — most especially China, India and Turkey — have recently been adding to their gold reserves at an impressive rate.
What they’re doing is, these central banks are secretly and strategically accumulating gold. This transition is part of a larger trend of moving away from traditional fiat currency. As these countries bolster their reserves with gold, it signals confidence in gold’s stability and value retention during times of economic uncertainty.
The ramifications of this are true across a dynamics-driven macro outlook that continues to be fundamentally bullish for gold. The 50-day SMA continues to climb, indicating a strong bullish sentiment. This huge movement is another confirmation that a strong bullish sentiment is taking hold in the market. With central banks still on an aggressive buying spree, this adds further credence to gold’s long-term store of value thesis.
Upcoming Economic Indicators
As investors continue to seek direction in the gold market, all eyes are now focused on US consumer inflation data due out Wednesday. Core CPI – USA, December 2021 Analysts are looking for a 0.3% increase in the headline US Consumer Price Index (CPI). In fact, this report could have a monumental influence on gold prices. Usually, safe-haven assets are driven by inflation data investor expectations.
Should the CPI figures align with expectations or show higher-than-anticipated inflation, it could further bolster gold’s appeal as an inflation hedge. On the flip side, any surprise upside acceleration in inflation could cool bullish gold sentiment.