Gold prices have skyrocketed past the $2700/oz mark, driven by growing anticipation of global rate cuts and escalating tensions in the Middle East. The London Bullion Market Association has even made a bullish prediction, foreseeing a $2941/oz gold price within the next 12 months.
Technically, gold is currently overbought. However, the looming threat of an Israeli strike on Iran could help mitigate potential downside risks.
Gold prices have continued their upward trajectory, breaching the $2700/oz level as expectations for worldwide rate cuts gain momentum. The recent assassination of Hamas Political Bureau leader Yahya Sinwar, along with other key figures linked to recent attacks, has heightened concerns of a potential escalation in Middle East tensions. Despite this, gold was already on a bullish trend prior to these developments.
Various factors are contributing to the ongoing gold rally. Despite a strengthening dollar, gold prices are climbing steadily. Economic data from the UK and the upcoming ECB interest rate meeting have fueled expectations of global rate cuts, making gold an increasingly attractive investment option. Lower interest rates worldwide reduce the opportunity cost of holding onto gold, potentially prolonging the current rally.
In addition, a recent poll conducted by the London Bullion Market Association further supports the notion that gold prices may have room to grow. The poll predicts a price of $2941/oz for gold within the next year.
The impending US election and the resulting uncertainty surrounding the next US President are also driving demand for safe-haven assets like gold.
Technical Analysis of Gold (XAU/USD)
From a technical standpoint, analyzing gold has been challenging due to limited price action. While gold bears may have been hoping for resistance from US data, disappointing housing figures have instead led to a weakening dollar, which typically benefits gold prices.
Bulls should be cautious, as the Relative Strength Index (RSI) is currently in overbought territory across the four-hour, daily, and weekly charts. Profit-taking before the end of the day could pose a risk. However, the threat of an Israeli strike on Iran, which officials have hinted at, could potentially limit downward movement in the short term.
Immediate support levels are at 2700, followed by 2685 and 2673. On the upside, resistance is expected at today’s high around 2717, with further levels at 2725 and 2750.
GOLD (XAU/USD) Four-Hour (H4) Chart, October 18, 2024
Support
Resistance
Overall, the surge in gold prices can be attributed to a combination of factors, including expectations of global rate cuts, geopolitical tensions in the Middle East, and uncertainty surrounding the upcoming US election. Investors should monitor technical indicators like the RSI and key support/resistance levels to make informed decisions about their gold investments.