Gold (XAU/USD) prices have gone up again, reaching $2,730 on Tuesday. The increase is due to the ongoing conflict in the Middle East, as many investors see gold as a safe option during uncertain times. However, the rise in gold prices has slowed because of changes in the bond market and global interest rates.
Earlier, many believed interest rates would drop quickly. But stronger-than-expected U.S. economic data has changed that view. Now, the Federal Reserve (Fed) is less likely to cut interest rates by a large amount. This has slightly reduced gold’s appeal since it doesn’t pay interest.
Despite this, gold may continue to rise. The BRICS countries are meeting soon in Russia to discuss de-dollarization, and there could be talks about creating a gold-backed currency. This could boost gold prices further.
Conflict Increases Demand for Gold
As the Middle East conflict worsens, more people are turning to gold. On Tuesday, Hezbollah launched rockets at Israeli bases near Tel Aviv and Haifa. This came after Israeli airstrikes in southern Lebanon and Beirut, increasing tensions even more.
Although U.S. Secretary of State Anthony Blinken has visited the region multiple times, no ceasefire has been agreed upon. The conflict escalated when Israel targeted key economic sites in Beirut to cut off funding to Hezbollah. There’s also a chance Israel might strike Iran after an Iranian drone exploded near the residence of Israeli Prime Minister Benjamin Netanyahu.
Gold Prices Keep Moving Up
Gold prices are increasing across all time frames—short, medium, and long-term. After breaking above $2,700, the next target for gold is $2,750.
However, the daily chart shows the Relative Strength Index (RSI) is overbought. This suggests that investors should be careful. If the RSI drops back into neutral territory, it could mean that investors might sell some gold and prepare for a possible pullback. Key support levels for gold are at $2,700 and $2,685, which makes a large drop less likely.
Even if there is a small correction, the overall trend for gold remains strong, and prices will probably continue to rise after a brief dip.
Conclusion
With the Middle East conflict still unresolved, gold’s role as a safe-haven asset will likely remain important. Though changing interest rate expectations have slowed its rise, the upcoming BRICS summit could bring new momentum to gold prices, especially if talks about a gold-backed currency gain traction.
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