January 19, 2023
New Delhi, India
Geopolitical Tensions Drive Gold Price Recovery
Gold prices have seen a rebound, moving away from a recent one-month low, propelled by escalating geopolitical tensions in the Middle East. The catalysts include retaliatory airstrikes by Pakistan inside Iran and ongoing clashes between US-led forces and the Iran-backed Houthi group in the Red Sea. These uncertainties amplify the appeal of gold as a safe-haven asset.
US Dollar Dynamics and Fed Rate Cut Uncertainty
While the US Dollar has maintained a sideways trend, the diminishing likelihood of a more aggressive policy easing by the Federal Reserve (Fed) is pushing US Treasury bond yields higher. This increase in yields acts as a headwind for gold price gains.
Equity Markets and Economic Indicators Impact
Positive sentiment in equity markets is contributing to a generally positive tone, potentially limiting the upside for gold. Resilient US macroeconomic data, including strong retail sales figures and lower initial jobless claims, suggest a robust economy. Consequently, market expectations for a March Fed rate cut have reduced.
Technical Analysis Points to Resistance and Support Levels
From a technical perspective, the gold price is facing resistance around the $2,040-2,042 supply zone. The lack of sustained buying beyond the 50-day Simple Moving Average (SMA) and negative traction on oscillators suggest a potential downside. Bearish traders may look for opportunities if there’s a sustained break below $2,000.
Potential Price Levels and Short-Term Outlook
In the event of a bearish scenario, gold could decline towards the December monthly swing low around $1,974-1,973. Strong support is expected near the 100- and 200-day SMAs at $1,971-1,963. Further losses might lead to a drop to the $1,955 intermediate support and, eventually, the November swing low at $1,932-1,931.
Market Monitoring and Upcoming Data Releases
Traders are advised to closely monitor upcoming US macro data, including the Preliminary Michigan Consumer Sentiment, Inflation Expectations, and Existing Home Sales, for potential short-term opportunities in the gold market.
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