Gold Price

The gold market is a flurry of activity in the midst of local financial news, as prices move closer to a critical resistance level against the backdrop of rising Middle East tensions and falling US bond yields.

 

Gold Price surges

Demand for gold (XAU/USD) surged on the opening day of the week, continuing the steady increase in prices that occurred over the European trading session. The 50-day Simple Moving Average (SMA) has been broken, and the precious metal is expected to rise further, provided that it moves over the $2,040-2,042 supply zone. But until after the Federal Open Market Committee’s (FOMC) decision on Wednesday, traders are urged to exercise care.

 

Geographical Aspects

The demand for gold is rising as investors seek out safe-haven assets amid the escalating tensions in the Middle East. Concerns have grown after three US soldiers were killed in a recent drone attack on a US station in Jordan. The increase in gold prices can be attributed to President Joe Biden’s threat of reprisal.

 

US Treasury Bond Yields and Dollar Trends

Gold prices have increased as a result of the US dollar’s depreciation and the drop in US Treasury bond rates. Investors’ expectations for the Federal Reserve’s monetary policy are changing as the likelihood of significant rate reduction in 2024 declines. Consequently, gold’s appeal as a hedge against inflation and economic uncertainty has been reinforced.

 

Market Prognosis

Although gold bulls benefit from the present geopolitical environment, cautious optimism is prevalent prior to the FOMC meeting. According to technical analysis, a rally aimed at covering short positions might push prices towards the $2,077 intermediate level if there is persistent strength outside of the $2,040-2,042 resistance zone. On the other hand, if momentum falters, we can see a retest of support levels around the psychological $2,012-2,010 and $2,000 barrier.

 

Big Picture

A robust economy is shown by recent economic data, such as the GDP and the US Personal Consumption Expenditures (PCE) Price Index. Careful observation is necessary, though, given the uncertainty surrounding geopolitical tensions and the Fed’s monetary policy position.

 

What Comes Next?

Important events, including as the FOMC meeting and the release of the Nonfarm Payrolls (NFP) data later this week, should be closely monitored by traders. In the coming days, changes in US bond yields and any developments in the Middle East crisis might also have an impact on gold prices.

 

Methodological Evaluation

Technically speaking, bulls in gold are looking for a consistent breakout over the $2,040-2,042 resistance zone. If the breach is successful, there may be more upside potential up to $2,077. If momentum is lost, prices can drop down into support levels around $2,012-2,010, and $2,000.

 

US Dollar’s Performance

The US dollar continues to be quite stable in relation to other major currencies, showing just slight drops against the Euro, British pound, and Canadian dollar. It has, nevertheless, demonstrated strength vs the Japanese Yen, indicating conflicting market sentiment.

 

Gold prices continue to attract investor attention as geopolitical concerns rise and US bond yields fall. The demand for safe haven assets and technical indicators continue to support the optimistic outlook for gold, notwithstanding the persistence of near-term concerns. In the next days, traders are urged to maintain their vigilance and adjust to changing market conditions.

 

Common FAQ

What is Federal Reserve?

The country’s monetary and financial system is secure, adaptable, and stable thanks to the Federal Reserve, the US central bank. Federal Open Market Association. The Principles and Practice of Monetary Policy.

What does the Federal Reserve do, how does it impact the US Dollar?

In the United States, the Federal Reserve (Fed) sets monetary policy. The two goals of the Fed are to promote full employment and price stability. Interest rate adjustments are its main weapon for achieving these objectives. Interest rates are raised, which drives up the cost of borrowing for the whole economy when prices are rising too quickly and inflation exceeds the Fed’s 2% target. As a result, the US becomes a more appealing location for foreign investors to park their money, which strengthens the USD.
The Fed may cut interest rates to encourage borrowing when inflation drops below 2% or the unemployment rate is too high, which hurts the value of the greenback.

How often does the Fed hold monetary policy meetings?

The Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) meets eight times a year to discuss monetary policy and evaluate the state of the economy. Twelve Fed officials attend the FOMC: the president of the Federal Reserve Bank of New York, four of the remaining eleven regional Reserve Bank presidents (who are appointed to one-year terms), and the seven members of the Board of Governors.

What is Quantitative Easing (QE) and how does it impact USD?

The Federal Reserve may use a measure known as Quantitative Easing (QE) under dire circumstances. In a financial system that is stalled, the Fed uses quantitative easing (QE) to significantly enhance the flow of credit.
It is an unconventional policy tool that is employed in times of crisis or exceptionally low inflation. It was the Fed’s go-to tool in the 2008 Great Financial Crisis. The Federal Reserve prints additional dollars and uses them to purchase investment-grade bonds from banks. In general, QE depreciates the US dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

The opposite of quantitative easing (QE), known as quantitative tightening (QT), is when the Federal Reserve ceases purchasing bonds from financial institutions and does not use the principal on the maturing bonds it owns to buy new bonds. In most cases, it is advantageous to the US dollar’s value.

 

 

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Disclaimer: In this post should be interpreted as financial advice; it is strictly informational in nature. Before making any investment decisions, readers are advised to undertake their own research and speak with a certified financial advisor because investing in gold and other financial assets includes inherent risks. The material provided here is not guaranteed to be accurate or comprehensive, and neither the author nor the local tune news blog are liable for any losses or damages that may arise from using this information.