GOLD Price Surges on Geopolitical Tensions Despite Dollar's...
Updated
Gold Price Surges on Geopolitical Tensions Despite Dollar's Disinterest
The recent surge in Gold prices can be attributed to a confluence of factors, with buyers capitalizing on Friday's rally, propelling the precious metal to new heights at the beginning of the week. Gold received a significant boost from renewed safe-haven flows, fueled by escalating geopolitical risks arising from the conflict between Yemen and the US over the weekend. The US military reported that Yemen's Houthi rebels targeted commercial ships in the Red Sea, leading to retaliatory actions by a US warship, intensifying market concerns.
Gold as a Safe-Haven Asset:
Gold has long been recognized as a traditional safe-haven asset, and its recent price movement underscores its appeal during times of heightened geopolitical tensions. Investors often flock to gold as a store of value and a hedge against uncertainty.
Divergent Responses: Gold vs. US Dollar:
Surprisingly, the United States Dollar (USD), another safe-haven currency, failed to find inspiration from the fresh geopolitical risks. This discrepancy is notable as market participants increasingly anticipate a Federal Reserve interest rate cut in March, with a substantial 60% probability priced in. Despite Fed Chair Jerome Powell's efforts to push back against expectations of a policy pivot, the market remains skeptical, particularly in the context of cooling inflation in the US.
Technical Analysis:
From a technical standpoint, Gold exhibited a robust bullish impulse over the last 24 hours, culminating in a notable spike in the latest daily candle. However, the price retreated to the $2069 area, signaling a potential rejection. This reversal could prompt a retracement to the 50% and 61.8% Fibonacci levels, laying the groundwork for a new and powerful bullish rally.
Our preference
Short positions below 2149.000 with targets at 2009.500 & 1940.000 in extension.
The recent surge in Gold prices can be attributed to a confluence of factors, with buyers capitalizing on Friday's rally, propelling the precious metal to new heights at the beginning of the week. Gold received a significant boost from renewed safe-haven flows, fueled by escalating geopolitical risks arising from the conflict between Yemen and the US over the weekend. The US military reported that Yemen's Houthi rebels targeted commercial ships in the Red Sea, leading to retaliatory actions by a US warship, intensifying market concerns.
Gold as a Safe-Haven Asset:
Gold has long been recognized as a traditional safe-haven asset, and its recent price movement underscores its appeal during times of heightened geopolitical tensions. Investors often flock to gold as a store of value and a hedge against uncertainty.
Divergent Responses: Gold vs. US Dollar:
Surprisingly, the United States Dollar (USD), another safe-haven currency, failed to find inspiration from the fresh geopolitical risks. This discrepancy is notable as market participants increasingly anticipate a Federal Reserve interest rate cut in March, with a substantial 60% probability priced in. Despite Fed Chair Jerome Powell's efforts to push back against expectations of a policy pivot, the market remains skeptical, particularly in the context of cooling inflation in the US.
Technical Analysis:
From a technical standpoint, Gold exhibited a robust bullish impulse over the last 24 hours, culminating in a notable spike in the latest daily candle. However, the price retreated to the $2069 area, signaling a potential rejection. This reversal could prompt a retracement to the 50% and 61.8% Fibonacci levels, laying the groundwork for a new and powerful bullish rally.
Our preference
Short positions below 2149.000 with targets at 2009.500 & 1940.000 in extension.
Note
In a swift turn of events, the price of gold has experienced a significant drop, plummeting over 2% after reaching a historic pinnacle at $2149. The catalyst behind this sudden decline is attributed to remarks by Federal Reserve Chair Jerome Powell, who underscored a cautious stance, signaling the Fed's readiness to intervene if necessary. Powell also emphasized that it's premature to declare victory over inflation.
Market Dynamics:
The notable plunge in gold prices unfolded during early trading in the North American session on Monday. The precious metal, which had soared to an all-time high, found itself at the mercy of money market futures traders who intensified their bets on the likelihood of the US Federal Reserve (Fed) implementing rate cuts in the upcoming year. This sentiment shift triggered a swift market reaction, sending the price of gold spiraling downward.
Current Position:
As of the latest update, XAU/USD is trading at $2023.65. A closer examination reveals that our analysis from yesterday correctly anticipated a retracement after the notable spike in gold prices.
Fed Caution and Market Sentiment:
Federal Reserve Chair Jerome Powell's recent comments played a pivotal role in shaping market sentiment. The emphasis on caution and the Fed's commitment to taking action if necessary injected uncertainty into the markets. Powell's assertion that it's premature to claim victory over inflation added an additional layer of apprehension, prompting traders to reassess their positions.
Outlook and Analysis:
The prevailing outlook in the aftermath of the gold price drop leans towards a bearish continuation. The retracement observed aligns with our previous analysis, indicating a corrective phase after the pronounced surge. Traders are advised to closely monitor developments in the wake of Powell's comments and the evolving landscape of monetary policy.
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