Tuesday’s European session saw Gold (XAU/USD) shoot up to a one-week high near $4,460 – a price point that’s been attracting a lot of interest from investors looking for a safe-haven. Geopolitical tensions are rising, and investors are expecting the US Federal Reserve to take a more dovish stance.
Feel that the recent US military actions in Venezuela, the escalating tensions between Saudi Arabia and the UAE, the unrest in Iran & the ongoing Russia-Ukraine conflict have all made investors nervously spooked. As a result, a growing number are turning to Gold, and it has rallied, continuing its positive momentum.
As you might expect, the geopolitical tensions continue to simmer, providing a strong underpin for Gold. US President Donald Trump has been warning that a second military strike could be on the cards if Venezuela’s administration doesn’t start cooperating with US efforts.
Trump also made it clear that if Mexico & Colombia don’t do their part in reducing the flow of illicit drugs coming into the US, they could be facing some military action too.
To top it all off, Saudi Arabia has hit back at the UAE, publicly accusing it of undermining their national security. The lack of progress in the Russia-Ukraine peace talks has also reinforced Gold’s appeal as a safe-haven, keeping investors on high alert.
On the economic front, US Manufacturing PMI has been mixed, strengthening expectations that the Fed will take a more cautious approach.
For example, S&P Global reported that US Manufacturing PMI stayed at 51.8, it’s still expanding but at a slower rate. Meanwhile, the ISM Manufacturing PMI dropped to 47.9 – a sign that business activity is actually contracting. Traders are still expecting the Fed to cut interest rates two more times this year.
On top of that, worries about the Fed’s independence under President Trump are taking their toll on the US Dollar. And with a softer dollar, gold is getting a boost – after all, the yellow metal tends to rise when the Dollar is on the back foot.
The NFP (non-farm payrolls) report is due out this Friday & everyone’s watching with interest. The forecast is for a 62,000 jobs increase, compared with the previous month’s 64,000 increase, & an unemployment rate of 4.6% last month.
If the report comes in weaker than expected, it could reinforce expectations that the Fed will keep cutting interest rates this year, which would likely weigh on the US Dollar & support Gold as a safe-haven.
Conversely, if job growth is stronger than expected, it could lift the Dollar and limit Gold’s upside. So, the NFP report is expected to provide a key signal for the near-term direction of both the Dollar & Gold.
Gold may hold above $4,450, testing $4,500–$4,520, while Silver stabilizes above $75.70, targeting $80.50, as safe-haven demand and softer dollar sentiment persist ahead of NFP data volatility near-term bias bullish
Gold (XAU/USD) on the 2-hour chart is trading near $4,472, having extended its recovery after defending the rising trendline that’s been guiding it higher since mid-December.
What’s interesting is that the rebound from the $4,275-$4,300 support zone has been marked by some really strong bullish candles with very little lower wicks, suggesting active dip buying rather than just a weak bounce.
Immediate resistance is seen at $4500-$4520, a prior supply zone where selling emerged previously. A break above this area would put $4550 on the horizon.
Silver (XAG/USD) on the 2-hour chart is trading near $78.40, holding above the rising trendline that’s been guiding it higher since mid-December. What’s interesting is that recent candles are showing smaller bodies near resistance, suggesting short-term consolidation rather than a full-on sell-off after the sharp rejection at $82.00.
Key support is defined at $75.70, followed by trendline support near $73.00, where buyers stepped in previously. On the upside, resistance sits at $80.50, then $84.10, the prior swing high. The trade idea is to buy pullbacks near $75.70, targeting $80.50, with a stop below $73.00.
Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.
