Gold and Bullish Expectations of Investors

Gold prices have recently experienced a meteoric rise as geopolitical tensions raise the appeal of safe-haven assets, boosting gold prices and decreasing US Treasury yields. However, in the past two weeks, as tensions eased and fears of a later interest rate cut sent the dollar and bond yields rising again, gold lost some of its previous gains. Now, again, we can see some signs that the downtrend is ending and the yellow metal is entering into new bull runs, which can be less intense but longer-lasting periods. However, in the short term, a stronger USD can hold bulls back.

 

Last week, the US Federal Reserve kept interest rates unchanged at its policy meeting within a target range of 5.25% to 5.50%. The Fed’s forward guidance was hawkish, indicating that interest rates will remain at high levels for longer, and these comments were reiterated by Fed speakers in recent days after the FOMC meeting. Most FOMC members believe that it's better not to start reducing interest rates until there is more evidence of disinflation.

 

On the labor market front, the US Employment report was weaker than expected, with 175k newly created jobs. The unemployment rate also increased to 3.9%, which was higher than estimates. Therefore, the US NFP report confirms the easing of the US job market, which in turn may ease the hawkishness of Fed policies to start rate cuts from September, which can decrease the USD rate and could support gold’s price.

 

Since US stock markets usually trend opposite to gold prices, and we are expecting stock prices to decrease in the coming months, it can also be considered another reason for gold being a buy for a longer time.

 

Additionally, ceasefire talks between Israel and Hamas in Cairo have not yielded results so far, and Israel has already started attacking Rafah as well. Concerns that the crisis in the Gaza area may spread to neighboring countries can still increase safe-haven assets, keeping gold and silver prices high.

 

From a technical point of view, XAUUSD still moves in a clear uptrend. S1 and S2 sit at 2,275 and 2,235, with the key pivot at 2,180. Bulls have 2,360 and 2,425 as their next targets.