- The price of gold extends the recovery rally towards 3,400 $ early on Tuesday.
- The US dollar remains defensive in the midst of problems in the Asian FX and speculation about the Fed.
- Technically, the way of lower resistance seems to be upwards for the price of gold.
The price of gold extends its recovery rally for the second consecutive day on Tuesday, since buyers seem unstoppable in the midst of a bearish feeling around the US dollar (USD) and the growing geopolitical tensions in the Middle East.
The price of gold continues to rise through safe refuge flows
Despite the renewed optimism that the US will reach commercial agreements with some of its commercial partners as soon as this week, the erratic commercial policies of US President Donald Trump continue to disturb the markets, allowing the price of gold to recover lost land.
Trump said Monday night that he would announce pharmaceutical tariffs in the next two weeks after signing an executive order to encourage the manufacture of medicines in the United States (USA).
In addition, chaos in the exchange of Asian currencies also keeps the demand for refuge for precious metal alive. Markets speculate that some of the Asian central banks are planning to revalue their coins to protect against the impact of US tariffs.
In this sense, the Taiwan (TWD) dollar jumped 8% against USD on Monday, contributing to the new drop in the dollar. Previously, the Central Bank of Hong Kong sold the local currency to avoid being strengthened in front of the USD.
In addition, the growing geopolitical tensions between Israel and the Hutis rebels and between Russia and Ukraine continue to act as a tail wind for the traditional value shelter that is the price of gold. In the last developments, Russian officials said that Ukraine threw drones over Moscow for the second consecutive night, forcing the closing of the three main airports of the capital. In addition, they reported that the Ukrainian forces were trying to advance in the western region of Kursk in Russia.
Meanwhile, “Israel, supposedly in coordination with the USA, launched air attacks in the port of Hodeidah in Yemen in response to the attack with ballistic missiles of the Hutíes rebels that hit the Ben Gurion International Airport on Sunday,” said Fxstreet analyst Haresh Menghani.
Therefore, the price of gold seems to remain in a constructive space for the two -day monetary policy meeting of the US Federal Reserve (FED) that begins later on Tuesday. Commenting on the next Fed event, Nick Timiraos, the “whisper” of the Fed of the Wall Street Journal, said that the Fed “prepares for difficult judgments and emerging divisions about when to cut the interest rates.”
Gold optimists dismissed bets to a rate cut in June in the midst of an improvement in economic perspectives, since commercial headlines and geopolitics dominate, in advance of the decision of fees of the Fed and the comments of President Jerome Powell.
The data showed on Monday that the PMI index of services of the Institute of Supply Management (ISM) rose to 51.6 from 50.8 in March. Steve Miller, president of the ISM Services Survey, said: “April’s change in the indices was a reversal of the March address,” pointing out increases in new requests, employment and suppliers deliveries.
Technical analysis of gold price: Daily graphics
The price of gold maintains the rebound from the critical support of the simple mobile average (SMA) of 21 days, now at $ 3,260.
The 14 -day relative force (RSI) index remains firm above the midline about 62, suggesting that there is more upward space.
The last leg to the rise needs acceptance above the barrier of $ 3,400 so that gold buyers can show their force towards the channel support (now resistance) at 3,467 $.
Above, the historical maximum of $ 3,500 will come into play.
On the contrary, the immediate support is seen at $ 3,300 in a setback, below which the 21 -day SMA at $ 3,260 will be challenged again.
A failure to defend the latter will feed a new downward movement towards the psychological level of $ 3,150.
Oro FAQs
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of gold to rise rapidly due to its condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts gold prices.
