Gold prices have risen sharply as a result of ongoing geopolitical tensions and a weaker US Dollar. With Israel’s recent strikes on Rafah, the demand for gold as a safe-haven asset has increased. Central banks’ gold purchases also contribute to its long-term strength, although the Federal Reserve’s decision to maintain high interest rates could reduce gold’s appeal as an investment.
While US banks were closed for Memorial Day, attention shifts to key Fed speeches on Tuesday. Officials like Michelle Bowman, Loretta Mester, and Neel Kashkari are expected to provide insights into future policy. The spotlight will also be on the preliminary US GDP data for Q1, with growth anticipated at 1.5%. If the figure exceeds expectations, the US Dollar could strengthen, potentially putting downward pressure on gold prices.
Geopolitical Risks Push Gold Prices Higher
Israel’s air strikes on Rafah, as reported by the Ministry of Health in Gaza, have resulted in at least 35 casualties, heightening geopolitical tensions. These events have bolstered the demand for gold, which has gained over 16% this year. The World Gold Council data reflects this surge, with prices reaching record highs above $2,400 per ounce in May.
Positive Economic Data Supports US Dollar
US Durable Goods Orders rose by 0.7% in April, surpassing forecasts. Similarly, the University of Michigan Consumer Sentiment Index improved to 69.1 in May, suggesting increased consumer confidence. This stronger economic performance, coupled with rising inflation expectations, could help the US Dollar gain strength, which may, in turn, weigh on gold prices.
Analysts Raise Gold Price Forecasts
Many analysts are adjusting their gold price outlooks. UBS projects gold to hit $2,600 by the end of 2024, while Citi analysts predict prices could soar to $3,000 in the next 6-18 months. These bullish forecasts come amid rising global uncertainty and increased central bank buying. On the downside, India’s gold imports may fall by 20% this year as higher prices push consumers to exchange old jewelry for new pieces.
Technical Analysis Points to Bullish Outlook
Technically, gold remains in a bullish trend. Prices are holding above the critical 100-day Exponential Moving Average (EMA), suggesting ongoing strength. However, with the 14-day Relative Strength Index (RSI) at 48.5, there’s a possibility of consolidation or a slight decline. The first key resistance level lies at $2,428, with potential gains extending to $2,450 and $2,500. On the downside, support is found at $2,300 and further at the 100-day EMA of $2,220.
US Dollar Performance This Week
This week, the US Dollar gained most significantly against the Swiss Franc. As shown in the heat map, the Dollar has experienced fluctuations against major currencies, reflecting the shifting global economic landscape.
Conclusion
As geopolitical risks and economic uncertainty rise, gold continues to attract safe-haven flows. While the Federal Reserve’s monetary policy may influence gold’s future appeal, for now, rising demand from central banks and investors is keeping prices elevated.
For more updates on gold price movements, you can check out the Daily Gold Update. You can also explore more insights at Daily Gold Signal.
