Weak US Dollar & Fed Expectations
Gold prices traded to fresh record highs today before stalling and softening a little as traders brace for the March FOMC meeting later today. The yellow metal has been a firm favourite this year, benefiting from USD weakness and strong safe-haven inflows amidst a volatile geopolitical environment. Trump’s trade war has fuelled a significant uptick in demand for gold. With US economic risks (including risk of recession) seen rising as a result of tariffs, and expectations of a more dovish easing path from the Fed, USD has been heavily sold in recent weeks/months, which has helped drive gold prices higher. With traders bracing for fresh tariffs to take effect from April 2nd gold prices look poised to continue higher with safe-haven inflows expected to rise accordingly. Traders are expecting a dovish message from the Fed today which should keep USD anchored lower and offer further support for gold.
Middle East Fears
Developments in the Middle East this week are also feeding into bullish sentiment in gold. US airstrikes on Houthi targets in Yemen at the weekend is a concerning development. Trump has warned that strikes will continue unless the Houthis stop their attacks on Red Sea shipping lanes. Trump has also warned that Iran will be held responsible and suffer ‘dire consequences’ of any further Red Sea attacks. This news comes at a time when Israel has resumed its attacks on Gaza, killing several hundred in missile strikes on Monday, leading to greater instability and fear in the region. Against this backdrop and with the risk of further violence, gold prices look likely to continue to draw safe-haven demand near-term.
Technical Views
Gold
The rally in gold has seen price trading up the 2% Fib extension level where the market is currently stalled. While above the 2,949.88 level and broken bull channel highs, focus is on a continuation higher. Should we break below that level, 2,859.15 will be the next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.