Many factors have contributed to the recent surge in the gold price. Buyers extended their gains from Friday, with gold capitalizing on heightened flows into safe-haven assets in response to renewed geopolitical tensions between the United States and Yemen that emerged over the weekend.
Geopolitical Uncertainty Sent Gold To The Record High
According to the US military, three commercial ships in the Red Sea were struck by ballistic missiles launched by Houthi militants in Yemen. In retaliation, a US warship shot down three drones involved in the assault.
The United States military's Central Command issued a statement emphasizing that these assaults jeopardized maritime security and international commerce. It was also suggested that there is reason to believe Iran is entirely facilitating these attacks even though the Houthis initiated them in Yemen.
These tensions contribute to the ongoing dispute between Israel and Hamas, as the armistice was called off on Friday after Hamas was accused of violating the agreement. In the Gaza Strip, the Israeli military recommenced operations against Hamas. Historically regarded as a safe-haven asset, gold typically gains value as geopolitical tensions escalate.
US Dollar Index (DXY) Update
Notwithstanding these geopolitical hazards, the United States Dollar (USD), an additional safe-haven currency, remained largely unaffected. The market's anticipation of a Fed interest rate cut in March, which current market pricing places at a 60% probability, is the cause.
Despite attempts by Fed Chair Jerome Powell to dispel expectations of a policy shift, the markets remained unconvinced due to the decline in US inflation.
What Can Move The Gold?
The future course of the gold price is contingent upon many factors, encompassing the US Dollar's intricacies and the Federal Reserve's anticipations.
The movement of the gold price could be impacted by geopolitical developments, specifically those occurring in the Middle East. However, it is anticipated that dovish Fed expectations will dominate risk sentiment and US Dollar valuations this week as traders await crucial US employment data.
A confluence of geopolitical influences, expectations regarding monetary policy, and market dynamics are anticipated to impact the price of gold in the forthcoming days.
XAUUSD Technical Analysis
In the weekly chart of XAUUSD, the broader market trend is bullish, where ongoing selling pressure is seen from the all-time high.
The ongoing tension from the geopolitical uncertainties sent the Gold price to an all-time high level. Moreover, the price moved beyond the potential trend line resistance. As the price formed an immediate bearish rejection with a n exhaustion from the all-time high level, we may consider it as a bearish reversal opportunity.
On the bearish side, the near-term support level is at the 1981.49 Fibonacci Retracement level, while the dynamic 20-week SMA has an upward slope.
A bullish continuation might come after a valid daily candle above the 2067.00 static level, which can extend the buying pressure above the 2150.00 level.
