Gold surges past $3,400 on Israel-Iran war risk, soft US inflation boosts safe-haven demand
- Bullion rallies to five-week high amid geopolitical tension and dovish Fed outlook
- Israel strikes Iran, fueling fears of broader war and driving flight to safety into Gold.
- XAU/USD hits $3,446 before easing on profit-taking; eyes next week’s Fed decision and US data slate.
XAU/USD technical outlook: Gold price consolidates near $3,400
Gold price is set to extend its gains past the $3,450 figure, clearing the path to challenge the record high of $3,500 in the near term. The Relative Strength Index (RSI) shows that momentum remains bullishly biased, and with that in mind, the path of least resistance is tilted to the upside.
Conversely, if XAU/USD tumbles below $3,450, the first support would be the $3,400 mark. If it surpasses, the next stop would be the 50-day Simple Moving Average (SMA) at $3,281, ahead of the April 3 high-turned-support at $3,167.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.