Gold Buyers Reclaim $2,000, What's Next?
Updated
Gold prices entered a consolidation phase at the start of the new week after surging to a five-month high of $2,009 last Friday. The market remains cautious amid escalating tensions in the Gaza-Israel conflict and upcoming key central bank meetings. Despite the ongoing bullish momentum, gold experienced a remarkable recovery, surpassing the crucial $2,000 mark on Friday and currently defending that level.
The 14-day Relative Strength Index (RSI) hovers just above the overbought territory, indicating a potential upward trend ahead. The 21-day Simple Moving Average (SMA) is poised to cross above the 50-day SMA. If this occurs on a daily closing basis, a Bull Cross will confirm, opening the door for a new uptrend.
In this scenario, the possibility of extending the ongoing uptrend to a new high around $2,020 in mid-May cannot be ruled out. Conversely, failure to sustain the $2,000 level might lead to a correction towards the round figure of $1,990, with support possibly forming around the Friday's low of $1,977.
Sustaining below this level could prompt gold sellers to test the static support level at $1,963. However, the gold rally paused on Monday due to lingering risk aversion following the global flight to safety last Friday amid Israel's deeper incursion into Gaza. Israel conducted intense airstrikes with fighter jets on Friday, continuing through the weekend and into Monday, termed the "second phase" of the attack.
Israel persists in bombing Gaza, focusing particularly on its northern region. Dr. Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization, shared a "humble plea for a ceasefire and peace" for Gaza. Concerns about a potential attack on Gaza's Al-Quds Hospital are growing, prompting immediate evacuations, while the airstrikes continue.
Amid the escalating tensions in the Middle East, investors continue to flock to the traditional safe haven of gold. The market remains apprehensive about the key policy announcements from the Bank of Japan (BoJ), Federal Reserve (Fed), and the Bank of England (BoE).
Meanwhile, news of the Supreme Court of Hong Kong hearing a lawsuit against the troubled real estate developer, China Evergrande Group, nearly two years after its default, caused the company's stocks to drop by 20%. Concerns about China's real estate market have left investors in a limbo, providing some support for the US dollar. The pause in the adjustment of US Treasury bond yields is also boosting the US dollar, limiting the gold price's upward momentum.
However, the US Treasury is set to announce quarterly refunds, which could significantly impact the bond market, eventually affecting US Treasury bond yields. The increasing US budget deficit has been the main reason for the recent rise in US Treasury bond yields, and therefore, Monday's announcement regarding the estimated borrowing for Q4 and Q1 2024 will be closely scrutinized.
Additionally, inflation and leading growth figures from Germany could significantly impact overall market sentiment and subsequently influence the pricing of the US dollar. However, conflicts in the Middle East will continue to dominate market sentiment and gold price action.
The 14-day Relative Strength Index (RSI) hovers just above the overbought territory, indicating a potential upward trend ahead. The 21-day Simple Moving Average (SMA) is poised to cross above the 50-day SMA. If this occurs on a daily closing basis, a Bull Cross will confirm, opening the door for a new uptrend.
In this scenario, the possibility of extending the ongoing uptrend to a new high around $2,020 in mid-May cannot be ruled out. Conversely, failure to sustain the $2,000 level might lead to a correction towards the round figure of $1,990, with support possibly forming around the Friday's low of $1,977.
Sustaining below this level could prompt gold sellers to test the static support level at $1,963. However, the gold rally paused on Monday due to lingering risk aversion following the global flight to safety last Friday amid Israel's deeper incursion into Gaza. Israel conducted intense airstrikes with fighter jets on Friday, continuing through the weekend and into Monday, termed the "second phase" of the attack.
Israel persists in bombing Gaza, focusing particularly on its northern region. Dr. Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization, shared a "humble plea for a ceasefire and peace" for Gaza. Concerns about a potential attack on Gaza's Al-Quds Hospital are growing, prompting immediate evacuations, while the airstrikes continue.
Amid the escalating tensions in the Middle East, investors continue to flock to the traditional safe haven of gold. The market remains apprehensive about the key policy announcements from the Bank of Japan (BoJ), Federal Reserve (Fed), and the Bank of England (BoE).
Meanwhile, news of the Supreme Court of Hong Kong hearing a lawsuit against the troubled real estate developer, China Evergrande Group, nearly two years after its default, caused the company's stocks to drop by 20%. Concerns about China's real estate market have left investors in a limbo, providing some support for the US dollar. The pause in the adjustment of US Treasury bond yields is also boosting the US dollar, limiting the gold price's upward momentum.
However, the US Treasury is set to announce quarterly refunds, which could significantly impact the bond market, eventually affecting US Treasury bond yields. The increasing US budget deficit has been the main reason for the recent rise in US Treasury bond yields, and therefore, Monday's announcement regarding the estimated borrowing for Q4 and Q1 2024 will be closely scrutinized.
Additionally, inflation and leading growth figures from Germany could significantly impact overall market sentiment and subsequently influence the pricing of the US dollar. However, conflicts in the Middle East will continue to dominate market sentiment and gold price action.
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