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Golden horizons: how geopolitical uncertainty and economic signals are steering Gold towards $2534

Alejandro Zambrano Alejandro Zambrano 17/04/2024
Golden horizons: how geopolitical uncertainty and economic signals are steering Gold towards $2534 Golden horizons: how geopolitical uncertainty and economic signals are steering Gold towards $2534
Golden horizons: how geopolitical uncertainty and economic signals are steering Gold towards $2534 Alejandro Zambrano

Nothing has been the same for gold traders since March 2024. From that point onwards, the price of gold has broken and soared past its August 2020 high of $2073 (a high it held for 1302 days). The price had attempted to breach this level in the past but failed every time. However, the benefit of the failed breaches was that the price ultimately created a large inverse head and shoulders pattern, with a target of $2534. Because of this, the price has risen without looking back, and the price action is similar to what was experienced in 2019 when the price left a range of 2184 days.
 

Yet, the situation is different today. There has been a large war in Europe with a superpower since February 24, 2022. From a market point of view, there is no winner, and the situation is likely to remain the same for months to come. However, uncertainty is around the corner if the USA elects former President Trump as their new leader in November. With Biden, the status quo would likely persist. Geopolitical tensions in the Middle East are sky-high, and every new weekend, there is another reason for people to assume that WW3 could start. These two factors are likely to support gold in the future.
 

On the economic front, clouds are appearing; the US economy and its labour market are solid. With that, inflation remains too high for the Fed to cut rates. Higher interest for longer looks to be the norm in the months ahead, making it more likely that gold prices will be volatile in the months ahead. Yet each time the Fed cuts interest rates in the last 24 years, gold prices have risen, and it will likely happen again. We know this as the US economy is growing at 3% per year while many other countries are recording little economic growth; hence, having US interest rates at 5.3% does not make sense in the long run.
 

The charts are clear from a technical point of view. The head-and-shoulders pattern suggests that the price might reach $2532, and this pattern will remain in play as long as the price trades above the breakout point of $2074.
 


 

In the short term, the trend is also bullish, but prices are trading sideways above $2317. If we trade above this level, gold prices are on track to their pattern target. However, if the price trades below $2317, we might see a dip to $2212, with bargain hunters probably looking to test long positions around this level. A break to $2143 will threaten the larger bullish structure and dramatically dampen the bullish mood.
 


 

What is your take on gold prices? Trade XAUUSD from 19 cents with ThinkMarkets. 

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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