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Gold Prices Forecast: Firm Amid Middle East Tensions, US Economic Strength

By:
James Hyerczyk
Updated: Apr 17, 2024, 10:47 GMT+00:00

Key Points:

  • Gold rises, influenced by Middle East unrest and strong U.S. data.
  • Federal Reserve policies impact gold and dollar values significantly.
  • Central banks continue to purchase gold, stabilizing prices.
Gold Prices Forecast

In this article:

XAU/USD Edging Higher in Cautious Trade

Gold prices rose on Monday, influenced by geopolitical tensions in the Middle East and strong U.S. economic indicators. Despite gains in the dollar and Treasury yields, gold maintained its status as a safe haven, even as central bank activities and Federal Reserve policies significantly impact market expectations.

At 10:19 GMT, XAU/USD is trading $2388.52, up $5.39 or +0.23%.

Geopolitical Impact on Gold Prices

The recent missile and drone attack by Iran on Israel, the first such aggression in over three decades, has stoked fears of an extended regional conflict, pushing investors towards the safety of gold. This movement aligns with expert analyses that point to the geopolitical situation as a key driver of the current rise in gold prices.

U.S. Economic Indicators and Federal Reserve Stance

March saw U.S. retail sales exceed expectations, indicating a robust economy. This development has adjusted market expectations about the Federal Reserve’s interest rate policies, with fewer rate cuts now anticipated by year-end. Comments from Federal Reserve Chair Jerome Powell highlighted the necessity for maintaining restrictive monetary policies, influencing both the dollar’s strength and investor strategies.

Central Bank Influence

Ongoing purchases by central banks have bolstered gold prices, demonstrating a strategic approach to gold reserves despite its high price. This sustained buying indicates that central banks are likely to continue supporting the market regardless of price fluctuations.

Short-term Market Forecast

While geopolitical premiums might decrease, causing gold prices to dip towards $2,200 in the near term, the overall market sentiment towards gold remains positive.

The continuous strategic buying by central banks and the enduring restrictive monetary policy stance of the U.S. Federal Reserve are expected to support gold prices. The market is poised for a bullish trend, underpinned by lasting global uncertainties and central banks’ unwavering interest in gold as a strategic asset.

Technical Analysis

Daily Gold (XAU/USD)

Gold (XAU/USD) is higher on Wednesday, suggesting traders may be gearing up for a test of last week’s record high at $2431.59. A trade through this level will signal the resumption of the uptrend.

On the downside, the nearest support is a pair of minor bottoms at $2324.25 and $2319.39. This area could be the trigger point for an acceleration to the downside.

The daily chart indicates there is plenty of room to the downside under $2319.39 with the best target and support the 50-day moving average at $2126.69.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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