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Gold prices have been on a rollercoaster ride in recent years, influenced by a mix of economic, monetary, and market factors.
The gold price has seen significant fluctuations, with prices dropping to a low of $1,046.60 in July 2015 and then surging to a high of $1,557.41 in August 2020.
Gold's safe-haven appeal has been a major driver of its price movements. As investors seek refuge from market volatility, gold's value tends to increase.
Investors have turned to gold as a hedge against inflation, with the metal's price often rising in response to rising inflation expectations.
Gold Market News
Gold prices have been on a roll, with a 27% gain so far this year, making it the metal's best annual return since 2010.
The sustained rally is attributed to strong safe-haven demand amid persistent geopolitical tensions in the Middle East and the prolonged Russia-Ukraine conflict.
Gold prices slipped in thin trade on Monday, down 0.1% to $2,618.99 per ounce, as markets awaited next week's U.S. economic data.
U.S. gold futures were steady at $2,632.30, indicating a quiet day with lower liquidity across all asset classes due to the holiday season.
Traders are eagerly awaiting next week's U.S. job openings data, the ADP employment report, the Fed's December FOMC meeting minutes, and the U.S. employment report for insights into the health of the world's economy.
Gold has gained around 27% so far this year and hit an all-time high of $2,790.15 on Oct. 31.
Gold is considered a hedge against economic and geopolitical turmoil, making it an attractive investment option for those seeking to diversify their reserves.
Spot silver was steady at $29.37 per ounce, while platinum edged lower by 0.5% to $915.07, having hit an over three-month low on Friday.
Palladium fell 0.1% to $911.10, indicating a slight decline in the precious metal market.
Technical Analysis
Gold's technical analysis is looking promising, with the XAU/USD currently trading above all its moving averages.
The daily chart shows that the positive momentum is not enough to confirm additional gains, but bulls still dominate the market.
The 4-hour chart, however, is firmly bullish, with the Momentum indicator heading north almost vertically above its 100 line.
The Relative Strength Index (RSI) indicator is also advancing around 70, indicating a strong buying interest.
To convince speculative interest that gold could re-test record highs, it needs to settle above $2,664.27, the December 16 high.
The moving averages lack directional strength, but gold has moved above all of them, which is a positive sign.
Support levels to watch out for are $2,639.15, $2,621.60, and $2,607.30.
Resistance levels to keep an eye on are $2,664.30, $2,678.85, and $2,691.60.
Fundamental Overview
Gold prices are currently trading around $2,650 a troy ounce, a reflection of market players' cautious approach to the new year.
Investors started the year by dropping high-yielding assets, a move that suggests they're concerned about the economic landscape ahead.
Additional reading: Krugerrand Value by Year
Central banks may slow the pace of interest rate cuts due to stubborn inflation, a development that's contributing to the current risk-averse environment.
Geopolitical tensions are also on the rise, with Ukraine interrupting the flow of Russian gas to several European countries, further fueling investor anxiety.
US indexes started the day on a positive note but quickly dipped into the red, prompting investors to seek safe-haven assets like gold.
Market players are slowly returning to their desks after the New Year holiday, which has led to a gradual increase in market activity.
Silver and Gold Relationship
The gold-to-silver ratio is a key indicator of market sentiment. It normally rises during risk aversion and falls during times of risk-on.
If the ratio is about to turn or reach key levels, traders look to equity indices to confirm the shift. The ratio's direction indicates whether gold or silver is outperforming, with a rising ratio favoring gold and a falling ratio favoring silver.
A high gold-to-silver ratio typically indicates a favorable market consensus for silver, while a low ratio suggests gold is favored and may be a good time to buy. This ratio can be used to switch holdings between silver and gold when it swings to historically determined extremes.
For more insights, see: Marketability Ratios
Influencers and Market Data
The World Gold Council's Chairman, David Harquail, plays a significant role in shaping the gold market through the organization's efforts to stimulate and sustain demand for gold.
The COMEX, a primary market for trading metals, is a key player in the gold market, with its division responsible for metals trading.
David Harquail and Steven Mnuchin, US Treasury Secretary, are two individuals who have a significant influence on the gold market.
The Chinese Gold & Silver Exchange Society (CGSE) is another important organization that influences the gold market, particularly in terms of China's gold reserve.
The main indicators that traders should watch to understand where gold is standing include demand vs supply for the commodity and struggling markets or context of currency devaluation.
The indices that traders should keep an eye on include the Hui (AMEX Gold BUGS), XAU (Philadelphia Gold and Silver Sector Index), and GDM (NYSE Arca Gold Miners Index).
Here's an interesting read: Short Term Gold Trading
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Here are some of the key organizations that influence the XAU/USD market:
- WGC (World Gold Council)
- LBMA (London Bullion Market Association)
- COMEX (Commodity Exchange Inc.)
- Zurich Gold Pool
- CGSE (Chinese Gold & Silver Exchange Society)
The following individuals have a significant influence on the XAU/USD market:
- David Harquail (World Gold Council's Chairman)
- Steven Mnuchin (US Treasury Secretary)
- Xi Jinping (President of the People's Republic of China and General Secretary of the Communist Party of China)
Sources
- https://www.fxstreet.com/markets/commodities/metals/gold
- https://www.ig.com/en/commodities/markets-commodities/gold
- https://www.cbsnews.com/news/do-1-ounce-gold-bars-make-sense-amid-golds-price-recovery/
- https://www.thehindubusinessline.com/markets/commodities/gold-gains-on-safe-haven-demand-amid-global-uncertainties/article69042015.ece
- https://www.zawya.com/en/business/commodities/gold-in-holding-pattern-as-markets-await-us-data-vf7cu82m
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