What is shaping gold’s trajectory right now? Several factors are at the wheel: ongoing geopolitical tensions, the Federal Reserve’s (Fed) unclear monetary path, a stronger dollar, and higher American Treasury yields.
The precious metal has a few powerful fundamental tailwinds. First, lingering hopes for de-escalation of the Middle East conflict are cooling inflation fears, thereby supporting bullion. Second, global central banks continue to systematically build up their gold reserves, creating solid long-term demand and preventing excessively sharp price corrections.
However, headwinds remain. The key one is the Fed’s hawkish stance. Soaring energy costs are currently fueling inflation, forcing the
American regulator to keep interest rates elevated. Rising Treasury yields and a stronger dollar are not what gold needs, given that it generates no income. If the market begins to price in another rate hike or a longer-than-expected continuation of the Fed’s hawkish policy, gold could come under renewed pressure.
From a technical perspective, gold prices have just tested the lower boundary of the trading range and rebounded, forming a reversal pattern.
Overall, the combination of fundamental and technical factors is sending slightly more positive signals than negative ones. So, the metal is likely to climb toward the upper limit of the flat channel ($4,770).
The ultimate recommendation is to buy gold at the current price, aiming for $4,770 per troy ounce within a couple of months. To mitigate the risk of adverse market movements, place a Stop Loss order slightly below the nearest support level, at around $4,360.
This content is for informational purposes only and is not intended to be investing advice.
