Gold went up this week, but it didn’t stay at its highest point, which it briefly reached on Friday in New York when it hit $2,430, a new record. Despite this, gold has been doing well lately, rising in seven out of the last eight weeks. Since mid-February, it’s gone up by more than 17%, even though it was already considered too expensive by many people.
These increases happened even though the US dollar is strong, and there’s been talk of interest rates going up in the US because the economy is doing okay and prices are going up (CPI readings). Normally, when US interest rates go up, gold prices go down, but that hasn’t been happening lately, confusing people who usually understand how these things work.
Geopolitical tensions in the Middle East are making gold prices go up. These tensions have become stronger recently, but they haven’t been a big deal for a long time. Just to explain a bit more, investors are worried that Iran might do something back to Israel after Israel bombed Iran’s embassy in Syria. If that happens, it could make things worse in the Middle East and maybe lead to a bigger fight.
Understanding What’s Driving the Market Right Now
Here are simpler explainations for why gold has been doing so well this year:
- Momentum Trap: Gold might be going up a lot because people keep buying it, which makes more people want to buy it too. This can make the price shoot up really fast, but it might not last forever. If people start feeling less excited about gold, the price could drop suddenly.
- Economic Concerns: Some investors might be worried that the economy could get worse because of actions taken by governments to control inflation. They might be buying gold as a way to protect their money in case things go bad.
- Inflation Worries: People who believe that prices are going up too much might be buying gold as a way to keep their money safe. They think that even if the government tries to stop prices from going up by raising interest rates, it might not work and prices will keep going up. In that case, gold could be a good investment because its price usually goes up when prices in general go up.
All of these reasons could be true, but the first one—that people keep buying gold because other people are buying it—seems to make the most sense. We’ve seen this happen before with other things people invest in, where the price goes really high because everyone wants to buy it, but then it drops suddenly when people stop being so interested. This could happen with gold too, but we don’t know when.
Technical Analysis Made Simple: Understanding Gold Prices
Gold went up this week and reached a new highest price ever, almost hitting $2,430. But then, the price went down a bit and ended the week at $2,344. If the price keeps going down in the next few days, it might find support at $2,305 first, then at $2,260, and if it goes even lower, people will be watching closely to see if it drops to $2,225.
On the other hand, if the price goes back up, the first challenge will be to break through the record high of $2,430. Since the market is already very stretched and the price has gone up a lot, it might be hard for gold to go even higher. But if it does break through, we might see it go up to $2,500.
GOLD PRICE TECHNICAL CHART
