Gold Prices Close at 2-Year Highs on Continued Geopolitical Risks

Gold prices moved higher and closed at the highest levels since January 2021. Geopolitical risks continue to help buoy the yellow metal. This risk will not go away, which means that gold should remain in an upward trend.

Bond prices moved lower, and yields started to gain traction following Tuesday’s bond rally. The dollar also gained traction but failed to weigh on the yellow metal.

Russia appears to have moved into the areas of Ukraine that they call the separatist regions. These actions have evoked some minor sanctions from the U.S. and Europe, but President Biden has threatened stronger sanctions to cripple the Russian economy.

Most pundits believe that the sanctions imposed by the U.S. missed the mark, which allowed riskier assets such as stocks to gain traction on Wednesday. The U.S. successfully destroyed the Iranian oil operation with sanctions, and they are likely to follow the same playbook with Russia.

Technical Analysis

Gold prices consolidated higher and closed at a 2-year high after making an 8-year high late last week. Prices remain above support near the 10-day moving average that comes in near $1,878. Resistance is seen near the June highs at 1,916.

The 50-day moving average has crossed above the 200-day moving average. This scenario is known as the “golden cross”. This moving average crossover usually points to a long-term upward trend that is now in place.

Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Prices are overbought as the fast stochastic is printing a reading of 95, above the overbought trigger level of 80. The movement of the fast stochastic could foreshadow a correction in gold prices.

Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram prints in positive territory. The trajectory of the MACD histogram is decelerating, which likely points to a period of consolidation.