Why traders are still bullish on gold
By Paul Reid
17 January 2024
In this article, we will cover Exness opinions alongside reporting from Barron’s, a commercial partner of Exness.
It’s been a crazy run for gold prices over the last year. And now, at a high of $2054 (USD), internal market sentiment shows that Exness traders see XAUUSD as a strong buy opportunity. But has that train already left the station, or are more bulls on the horizon?
Throughout 2023, gold prices had a rollercoaster ride from $1810 in February to the most recent high of $2076, with plenty of dips and crashes on the way. Even though the current price remains at the upper end of that range, it seems Exness traders are expecting more from gold this year. Here’s why.
Several factors are likely to contribute to gold's continued upward trajectory: rising inflation, geopolitical tensions, and a weakening US dollar are all expected to increase demand for gold as investors seek a haven asset.
Central banks also play a significant role in shaping gold prices through monetary policies, such as quantitative tightening, which involves reducing a country’s money supply. Raising interest rates tends to lower gold prices as investors seek higher returns from interest-bearing assets. However, quantitative tightening can boost gold prices as investors seek a store of value.
Currency devaluations and geopolitical tensions can also escalate gold prices, making it a more attractive asset class amidst uncertainty.
That’s the fundamental explanation, but does technical analysis support the bullish narrative? Here’s what an article from Barron’s had to say on the topic.
Gold Price Rises on Middle East Tension. Why It’s Poised for a Bullish Breakout.
BY PATRICK O'DONNELL | UPDATED JAN 15, 2024 06:27 AM EST
Gold prices were rising in early trading amid further geopolitical tensions in the Middle East, which are pushing investors to look for haven assets. And one analyst believes the precious metal could soon soar.
The price has recovered significantly since the end of last year, rising 6.46%, over the past three months and further tension in the Red Sea has bolstered his trend.
In the latest attack roiling global shipping amid Israel’s war with Hamas in the Gaza Strip, Houthi rebels in Yemen fired an antiship cruise missile toward an American destroyer in the Red Sea on Sunday. U.S. officials said it was shot down by one of their jet fighters.
However, while the conflict in the area is driving investors to havens, there are other indicators that gold may undergo a bullish breakout. Oanda senior market analyst Kelvin Wong has been studying charts to identify trends.
He said in an email that gold staged a V-shaped bullish reversal in the latter half of last week, at the lower boundary of its medium-term ascending channel—which has been in place since early October. He said this goes together with a “bullish momentum condition,” signaled by the daily relative strength index’s momentum indicator.
Also, gold has risen above the upper boundary of a former minor descending channel that has been intact since late December and the 20-day moving average, based on the one-hour chart, added the analyst. He pegged the next resistance level to watch as $2,090 per ounce.
Spot gold was trading up 0.29% at $2,057 per ounce early Monday.
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This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.