After the bearishness of last week, Gold (XAU/USD) started this week with some very strong upward momentum. It did so convincingly – blasting through its former record high of $4,059, which was achieved last Wednesday. Gold is around $4,090 these days. This represents a huge average increase of greater than 1.70% per day! That bullishness carried on into Monday, with new all-time highs set at just under $4,093.
Gold prices are breaking out higher, in a strong bullish continuation signal. Former points of resistance are becoming the immediate support in this move. In the eyes of analysts, only a move back under $3,950 would threaten this bullish structure. The short-term market sentiment is decidedly bullish, with the bullish traders looking for more upside and targeting the psychological level of $4,100.
Central Banks Boost Demand
One of the top drivers of demand for Gold over the last year has been monstrous support from central banks across the globe. Central banks purchased 1,136 tonnes of gold to their reserves during 2022, a record-breaking figure. Through the lens of the World Gold Council, this uptick amounted to around $70 billion. This number last year was the largest annual buy of Gold ever since record keeping started. Emerging economy central banks, including China, India, and Turkey, among others, are already increasing their gold reserves at a furious clip. Together, this surge is driving an incredibly bullish sentiment in the crypto market.
Geopolitical tensions stay on the upswing, particularly with the ongoing Russia-Ukraine war. Concurrently, fears of a U.S. government shutdown are forcing aggressive safe-haven investments into Gold. Gold has been adopted as a reliable store of value. Investors often flock to Gold in times of uncertainty, further strengthening its status as a safe haven asset.
“If the US persists in its own course, China will resolutely take corresponding measures to safeguard its legitimate rights and interests.” – China’s Commerce Ministry
China’s Commerce Ministry released a statement doubling down on the state of “ongoing trade war” against the United States. Understanding that these tensions are especially driving market dynamics. The speculation and uncertainty over trade relations has left investors on high alert and deeply affected patterns of asset flows.
Interest Rates and Economic Indicators
The present economic climate matches up with market projections for two more Federal Reserve interest rate cuts over the rest of this year. This outlook has continued to weigh on Treasury yields and offered an ongoing tailwind for Gold prices. That’s because lower interest rates decrease the opportunity cost of holding non-yielding assets such as Gold. Consequently, Gold starts to look like a safer bet for investors.
In addition to the building volume pattern, momentum indicators are looking very positive indeed. The RSI is moving up toward 70. That continuing upward trajectory has led some to believe that bullish short-term momentum could be building. But optimism is running up against a wall of caution from market participants as they look toward crucial economic data points.
The new CPI Consumer Price Index (CPI) report was scheduled for release this Wednesday. Due to the U.S. government shutdown, it has been pushed back to October 24. This delay could further impact market sentiment and investor behavior as they assess inflation trends in light of changing economic conditions.
Market Outlook and Future Projections
With Gold still riding a record-breaking rally, analysts say extensions toward $4,120-$4,150 can develop if upward pressure continues. Market participants are reorienting their strategies due to dramatic global economic developments. Taken together, this change indicates that the path of least resistance is shifting towards more price hikes.
On Monday, the US Dollar Index (DXY) climbed back to 99.00, retracing Friday’s steep losses. During these stormy times investors still lean towards Gold as the ultimate safe haven asset.
“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment… The U.S.A. wants to help China, not hurt it!” – President Donald Trump
Even more influential figures, including most notably President Trump, further illuminated the topsy-turvy nature of US-China relations.
Market psychology
Their proclamations weigh heavy on the scales of market sentiment. With tensions still rising and receding, investors are closely watching how these dynamics will continue to shape asset prices in the months ahead.