Gold Price Forecast: Bullish Trends Amid Geopolitical Unrest & Dollar’s Dip

Gold, a safe-haven asset, managed to stop its previous day’s downward trend and drew some fresh bids around the $2,030 level.

However, the price of gold is being bolstered by concerns about conflicts in the Middle East and the ongoing Russia-Ukraine war, as investors seen gold as a safe-haven asset during times of uncertainty.

Furthermore, the recent decline in the US dollar is seen as another significant factor supporting gold prices. However, the weakening dollar makes gold more appealing because it requires more dollars to purchase the same amount of gold. Therefore, investors often turn to gold as a hedge against a falling dollar, which in turn drives gold prices higher.

Moving ahead, traders are refraining from taking risks and are instead observing the market for fresh cues regarding the Federal Reserve’s (Fed) rate-cut trajectory.

US Monetary Policy & Its Impact on Gold

On the US front, the growing belief that the Federal Reserve will lower interest rates by mid-2024 is keeping the US dollar bearish and supporting gold prices. It should be noted that the market expects four 25 basis points rate cuts by the Fed in 2024, starting from June, which is putting pressure on the US dollar and bolstering gold.

Meanwhile, the yield on the 10-year US government bond remains above 4.0%, with traders eagerly awaiting the FOMC meeting minutes for clues about the rate-cut trajectory.

If policymakers signal a hawkish stance, it could lead to concerns that the Fed will maintain higher rates for longer, which strengthening the dollar and impacting the XAU/USD pair negatively. Currently, the situation favors gold as the US dollar is weakening.

Geopolitical Tensions Drive Gold Prices Amid Middle East Unrest and Russia-Ukraine Conflict

On the geopolitical front, gold, safe-haven asset is gaining support from ongoing tensions in the Middle East and the extended conflict between Russia and Ukraine. However, concerns persist about potential escalation in the Middle East due to recent attacks on shipping by Houthi rebels in Yemen.

Additionally, reports of Russia’s development of a space-based anti-satellite nuclear weapon are heightening global tensions. This comes amid weakened US-Russian relations, exacerbated by Russia’s invasion of Ukraine. Therefore, the US plans to announce significant sanctions against Russia in response to the ongoing war in Ukraine.

Hence, the ongoing tensions in the Middle East and the conflict between Russia and Ukraine, coupled with geopolitical uncertainties such as Russia’s reported development of a space-based anti-satellite nuclear weapon, are generally positive for gold as it is considered a safe-haven asset during times of geopolitical instability.

Gold Price Forecast: Technical Outlook

On February 21, Gold slightly retreated by 0.03%, closing at $2030.200. This minor dip places Gold just above its pivot point of $2023.361, signaling a bullish undertone.

Resistance levels are poised at $2038.689, $2053.285, and $2065.708, while supports are found at $2013.200, $1999.912, and $1988.187.

The Relative Strength Index (RSI) at 66, combined with a bullish engulfing pattern, and Gold’s breach of the pivot point, highlight a strong buying trend. The 50-day Exponential Moving Average (EMA) stands at $2017.676, further supporting the bullish sentiment.

Given these factors, Gold’s trajectory appears bullish above $2025, with an immediate target at $2038.689, suggesting continued upward momentum.