Gold Price Analysis – Gold Continues to Hover at $5000

Gold Technical Analysis

The gold market rallied a little in the early part of the trading session on Tuesday, only to turn around and fall back towards the $5,000 level. This is an area that I think will continue to be important because it is a large round psychologically significant figure and traders do like those levels.

Right now, we have a lot of different things driving gold. The first one is the conflict in Iran and that has added a bit of a geopolitical risk premium to the market. That does support gold. Recent volatility suggests that retail-driven leverage liquidations are causing sharp, erratic price drops even as tensions escalate.

There are concerns about stagflation in the United States and this is a situation where the US jobs data surprised to the downside in February, but inflation remains above 2.5%. This puts the Federal Reserve in a stagflation dilemma, which is historically gold positive, considering the 1970s, as it limits the Federal Reserve’s ability to hike rates aggressively.

Central Bank Demand and Long-Term Outlook

Central bank activity remains very positive for the market as they are net buyers and right now JP Morgan forecasts that the official sector demand will average 585 tons per quarter this year. Gold mine production is expected to plateau or increase only slightly this year. With demand picking up and production staying where it is, that adds a bit of a bullish momentum type situation.

In the short term, I think this is a market that you need to be a bit cautious with. The market is longer-term, though I do think it is bullish. I would not be surprised at all to see this market reach towards the $5,400 level, maybe even as high as $6,000 based on analyst estimates across the board.

It is basically taking a moment to catch its breath. I don’t read too much into what is going on and I do think it is busy on the dip, but I also recognize we just don’t have that catalyst yet. That makes sense after this big parabolic run over the last several months. When you have a market that has risen this sharply, it does make sense that there is a little bit of profit collecting and some questions about whether or not we can continue this momentum.

That is what we are going through right now. A little bit of patience probably goes a long way. I still like buying dips and I think your floor is at the $4,600 level.

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