Gold prices rose towards the $1840 per ounce level, in conjunction with the weakness of the US dollar and increasing geopolitical tensions arising from Russian movements against Ukraine.
This prompted many investors to turn to gold as a safe haven, fearing any potential global actions against Russia, especially given the possibility of a sudden Russian attack on Ukraine at any time.
The decline in yields on the futures of the ten-year US bonds further supported the strength of the gold surge. Yields retreated from their highest levels in two years and are currently trading at around 1.84%, compared to 1.90%.
In addition, the rise in oil prices to its highest level since October 2014 at $87.90 per barrel has heightened market expectations for an acceleration in inflation rates faster than the current levels, which have stabilized at their highest levels in 40 years in the United States.
The impact of central bank policies at the gold
Despite central banks' inclination to tighten monetary policy this year to curb the acceleration of inflation rates, the strong rise in oil prices may pose challenges in quickly controlling inflation rates, even if central banks raise interest rates multiple times this year. This is because the energy component has been a strong factor in pushing inflation rates to record levels since the global financial crisis in 2008.
Therefore, gold may continue to benefit from these expectations until the pace of inflation rates slows down sustainably. It is crucial to closely monitor the path of the Consumer Price Index (CPI), the leading gauge of inflation rates. If the pace of increase does not slow down, gold is expected to maintain its gains. If central banks succeed in curbing inflation and we witness a slowdown in the rate of increase, gold is likely to experience a long-term decline.
technical perspective from a dold
From a technical perspective, the stability of gold trading above the $1800 level in the short term has pushed gold towards the resistance level of $1830 again. With a breakthrough of the resistance level, gold recorded a strong increase to $1844, and profit-taking operations may lead to a corrective decline to retest the broken resistance level before resuming the upward trend.
The bullish outlook remains intact with a target of $1870 as long as gold trading remains above the $1830 level. It could shift to a neutral outlook supporting the stability of trades between $1800 and $1830 in case of a daily close below the $1830 level.
On the medium term, it is anticipated that gold prices could decline to the $1760 level if there is a daily close below the $1800 level.