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Gold Price Analysis: XAU/USD Hits New Peak Amid Rate Cut Expectations and Geopolitical Tensions

GOLD (XAU/USD) has recently extended its impressive rally, reaching a new zenith in the $2,144-2,145 range during Monday’s Asian trading session. This notable surge marks a continuation of the precious metal’s strong performance over the past few weeks.

However, gold has retraced slightly from these highs, now trading below $2,100 but still registering a daily increase of approximately 0.70%. This pullback reflects profit-taking actions by investors, spurred by the asset’s overbought status on the daily charts and a slight uptick in the US Dollar (USD).

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The decline in gold prices is somewhat mitigated by the increasing market consensus that the Federal Reserve (Fed) may begin reducing interest rates as early as March 2024. This expectation is bolstering gold, traditionally a non-yielding asset.

Adding to this, geopolitical uncertainties, including the escalating Israel-Hamas conflict and the threat of a new respiratory illness outbreak in China, are influencing investor sentiment and potentially restraining any significant corrections in GOLD prices. Notably, an attack in the Red Sea on an American warship and commercial vessels has heightened concerns over regional stability.

Moreover, the recent global equity market rally faces challenges due to these geopolitical tensions and health concerns in China. The World Health Organization’s interest in respiratory illness cases in China, particularly among children, is drawing significant attention.

Concurrently, geopolitical events in the Middle East, including a confirmed US military strike in Iraq and the attack in the Red Sea, have amplified the demand for GOLD as a safe-haven asset.

As investors await further clarity on the Fed’s policy direction, there’s a growing anticipation of a dovish stance, with the 10-year US Treasury yield dropping to a 12-week low. This cautious Fed outlook is keeping the USD bulls in check, providing additional momentum to gold prices. Key US economic reports due this week, including the ISM Services PMI, the ADP employment report, and the critical Non-Farm Payroll (NFP) data, are also in focus.

A recent World GOLD Council survey highlights a significant trend: 24% of central banks plan to increase their gold reserves in the next year, reflecting a growing scepticism about the US dollar as a reserve currency.

Gold Technical Outlook

The GOLD price opened today with a robust surge, effortlessly crossing our anticipated target of $2075.25 and reaching new record highs at $2144.60. However, it soon retraced, stabilizing around the initial level, which now serves as pivotal support after its breach.

We anticipate a continuation of the upward trend, with the immediate goal being to test the $2100.00 mark, potentially extending up to $2135.00.

Consequently, we maintain a bullish outlook for the coming period, bolstered by the support from EMA50. It’s important to note, though, that a breach below $2075.25 would halt the current ascent and could lead the price to undergo some intraday bearish correction.

Today’s trading range is expected to oscillate between the support level of $2070.00 and the resistance at $2110.00.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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