Quick overview
Gold (XAU/USD) started the week on a high note trading near $4,260 as investors scrambled to get out of the market due to growing uncertainty. Persistent trade tensions , the increasing risk of global conflict and the ongoing U.S. government shutdown have all led to renewed enthusiasm for the precious metal. Meanwhile, silver (XAG/USD) was hovering around $51.81 , down just 0.17% – showing that while investors are taking a bit of profit , safe haven sentiment remains intact.
Markets are also reacting to expectations that the Federal Reserve will embark on a more dovish policy, with traders fully betting on two further rate cuts later this year. This has had a knock on effect on the U.S. dollar making it less attractive – further boosting gold’s appeal. With the Fed now in its pre-meeting blackout period , the dollar will be vulnerable to any bad news and particualrly ahead of the US inflation report .
It’s all coming together to make gold a compelling hedge for both institutional and retail investors looking to protect their portfolios.
Institutional Demand Is Fueling Gold’s Rally
Gold’s resilience is being given a boost by strong demand from central banks and ETFs. These big players are steadily increasing their stake in the non yielding metal – seeking stability and protection in uncertain times. Analysts point out that global gold ETFs have been seeing a steady flow of new investment which suggests that the rally is driven by a combination of safe haven positioning and strategic diversification.
XAU/USD
Global tensions have also weighed in. Reports of fresh conflict breaking out in Eastern Europe and attacks on vital energy infrastructure have spooked investors and highlighted gold’s reputation as a store of value when things go wrong. Meanwhile the protracted US government shutdown- now in its third week – has raised concerns over the economy and fuelled demand.
Even when the US Chinese trade talks have made some progress and US-China tensions have eased a bit, for now at least – gold’s uptrend is still looking solid.
Gold Technical Outlook and Trade Set up
Technically gold is in a phase of consolidation after peaking near $4,381 – the price has been hovering within a rising trend channel making a possible bear flag pattern. Support has held firm near the $4,200 0.618 fib level where a long lower wick and a bullish spinning top candle showed renewed buying pressure.
GOLD Price Chart – Source: Tradingview
The 2 hour RSI is near 49, having recovered from weak levels but it still needs confirmation of a bullish reversal. A break above $4,270 could set off a move towards $4,325 (38.2% Fib ) and $4,380 – while failure to hold $4,200 may set gold back towards $4,137 or even $4,089, which would align with the 100-EMA and the base of the channel.
Trade Set up:
Buy Zone: $4,210-$4,230 ( near fib support)
Take Profit: $4,325 , extension to $4,380
Stop Loss: Below $4,180
Traders should watch out for a bullish engulfing candle or a 20- EMA crossover before taking a trade. While momentum is still a bit cautious the big picture is that the trend is still in gold’s favor, supported by a solid fundamentals, a good technical structure and safe haven demand.
Arslan Butt
Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.
His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.
His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
Related Articles