Gold price have continued to rise this week, reaching new highs of $2,664-$2,665 during the first part of the European session on Thursday. This upward movement is largely driven by ongoing geopolitical risks, particularly the worsening Russia-Ukraine conflict, which tends to favor gold as a safe-haven asset. Additionally, a slight dip in the US Dollar (USD) has provided further support to gold prices. This upward trend appears to be continuing without any indication of slowing down.
Geopolitical Tensions Fuel Gold’s Safe-Haven Appeal
The primary driver behind gold’s strength has been the growing geopolitical tensions. The escalating conflict between Russia and Ukraine, combined with Russia’s recent military strategies, has pushed investors toward gold, viewing it as a safe store of value. This marks the fourth consecutive day that gold prices have risen amid these geopolitical risks.
Investors are also concerned that the proposed policies of US President-elect Donald Trump, which are likely to spur inflation, may limit the Federal Reserve’s ability to cut interest rates. This has further bolstered gold’s appeal as an inflation hedge. Additionally, there have been signals from various Federal Reserve officials suggesting that further policy easing could be slow due to persistent inflation concerns, which has kept US Treasury yields high and the USD near its yearly peak.
Fed’s Caution and High Bond Yields May Cap Gold’s Gains
While the geopolitical environment supports gold, there are factors that may limit its upside. Elevated US Treasury yields and a generally positive market sentiment are factors that could prevent gold from making aggressive gains. The Federal Reserve has been cautious about cutting rates too quickly, with some key policymakers highlighting the need for a more measured approach to monetary policy.
Federal Reserve officials such as Lisa Cook and Michelle Bowman have recently expressed concerns that inflation might slow down the pace of rate cuts, which would prevent gold from benefiting significantly. Moreover, the CME Group’s FedWatch Tool indicates that market participants are pricing in a 50% chance of a rate cut in the December meeting, which will influence gold and USD movements.
What’s Next for Gold Price: Technical Levels and Market Outlook
From a technical standpoint, gold could face resistance around the $2,665 level. This point coincides with a key Fibonacci retracement level and the 100-period Simple Moving Average (SMA) on the 4-hour chart. If gold can break above this barrier, it could push further toward the $2,670-$2,672 range, with the potential to hit the $2,700 mark.
On the downside, the $2,635-$2,634 zone is a key support level. A break below this could bring gold down to the $2,620 area and possibly lower toward $2,600. If gold falls below this level, it may open the door to deeper losses, targeting the $2,557 region, with additional support around $2,570.
Upcoming Data and Market Expectations
Looking ahead, the US economic data, including the Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales, will provide insights into the economic health of the US and could influence gold price movements. Investors will also be paying close attention to comments from Federal Reserve officials, which will shed light on the future path of interest rates. These factors are likely to impact both the USD and gold prices in the coming days.
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