Gold price (XAU/USD) continues to stabilize in the $2,330s on Tuesday as geopolitical risks drive demand for the safe-haven asset. Demand from investors, including central banks, remains high due to Gold’s safe-haven qualities. Despite geopolitical risks, gains may be limited as data from the US suggests interest rates will remain high, reducing the appeal of the precious metal as a non-yielding asset.
Geopolitical risks, such as protests against Israel’s occupation of Gaza and Russia’s actions in Ukraine, have increased the demand for Gold. The IMF has also warned of a possible fragmentation in global trade, prompting countries to reevaluate their trading partners based on economic and security concerns. Western sanctions against nations like Russia and Iran are fueling a shift towards non-Western central banks hoarding Gold as an alternative to the US Dollar.
The move by BRICs nations to shift away from using the US Dollar for international trade has led to a surge in non-Western central bank demand for Gold. Many see Gold as a potential replacement for the US Dollar in volatile international trade deals. However, Gold price may face a cap due to US data indicating that interest rates may need to remain high to combat rising inflation. Real interest rates, calculated by subtracting inflation from interest rates, are currently high, making non-yielding assets like Gold less attractive.
Technical analysis shows that Gold price (XAU/USD) has found support after a recent correction. Despite breaking below major resistance levels, Gold has found support just above previous highs at around $2,330. The precious metal remains in a short-term bullish trend, with the potential to reach the April highs around $2,400. Confirmation of the uptrend would come with a break above the May 10th high of $2,378, with medium and long-term charts also showing a bullish outlook for Gold.
Overall, Gold continues to be a sought-after asset amid ongoing geopolitical risks and uncertainty in global trade alliances. Central banks and investors are turning to Gold as a safe-haven alternative to traditional currencies, especially as the US Dollar faces challenges in maintaining its dominance. While interest rates and inflation levels may impact Gold price in the short term, the overall trend remains bullish, with technical indicators pointing towards a potential resumption of the uptrend in the near future. Investors should keep a close eye on geopolitical developments and economic data to gauge the direction of Gold price movement in the coming days.
