Gold price has been on a rebound since the beginning of the week amid heightened safe haven demand. On Tuesday, Russian President Vladimir Putin updated the country’s nuclear doctrine following a Ukraine attack on its territory using US-made ATACMS missiles.
The SPDR Gold Trust (GLD) ETF was trading at $250 on Friday, up by over 5.6% from its lowest point this month.
At the same time, the easing of the US dollar has offered some support to gold price. Granted, the greenback’s rallying remains a headwind for the precious metal as investors maintain focus on the geopolitical tensions in Eastern Europe and the Fed’s interest rate decision.
Overall, economic and geopolitical uncertainties, and upbeat demand in gold’s physical market is set to continue offering support to prices.
Geopolitical Tensions
As a conventional safe haven asset, gold price thrives in geopolitical uncertainties. In fact, it is one of the drivers of this year’s rally, which has seen the precious metal record gains in eight out of the past ten months. In recent weeks, uncertainties over the US presidential elections, coupled with conflicts in the Middle East, bolstered gold price to fresh record highs.
The US presidential election results and subsequent rallying of the US dollar has yielded a pull back in gold prices. However, it remains above the crucial resistance-turn-support zone of $2,500 per ounce. More specifically, it has rebounded from the two-month low it hit late last week at $2,537 to $2,663 as at the time of writing.
In addition to the easing of the US dollar, the heightened conflicts in Eastern Europe has increased the demand for precious metals and other safe-haven assets.
Russia has signaled a nuclear confrontation after Ukraine used US-made ATACMS missiles against its territory. Ukraine quickly responded to Washington’s greenlight on the use of the long-range missiles with Russia confirming the attack on a Russian military facility in the Bryansk border region.
Reacting to the attack during a G20 news conference in Brazil, Russia’s Foreign Minister stated, “This is, of course, a signal that they want to escalate. We will be taking this a qualitatively new phase of the Western war against Russia. And we will react accordingly.”
Following the attack, President Vladimir Putin approved the updated Russian nuclear doctrine on Tuesday. The update indicates the new conditions under which the nation can consider using its arsenal. According to the update, Russia will treat an attack from a non-nuclear state, which is backed by a nuclear power, as a joint assault on the country.
US Dollar index strength
Gold price has also been bolstered by the ongoing US dollar index rally. Following Donald Trump’s victory in the US presidential elections, the greenback rallied to a level last recorded a year ago. Notably, the Trump win euphoria has started to wear off; an aspect that has supported gold price.
Nonetheless, the dollar’s rallying is still on and remains a key headwind for the precious metal. In fact, on Thursday, the currency hit a fresh one-year high amid talks over Trump’s trade policies, Fed interest rate decision, and tensions in eastern Europe. On Thursday, the dollar index hit 1st November 2023’s level of $107.16.
Investors are concerned that Trump’s trade policies may be inflationary. These concerns, coupled with Fed officials’ recent remarks on the state of the US economy have the market betting on the Fed scaling back on its interest rate cuts.
A decision by the US central bank to pause on its rate cuts during its December meeting may weigh on gold price in the short term. However, a positive outlook in the metal’s physical market, coupled with the ongoing geopolitical and economic uncertainties are set to limit its losses.
GLD ETF price analysis
GLD chart by TradingView
The daily chart shows that the GLD ETF dropped and bottomed at $236, which was a notable level since it coincided with the 23.6% Fibonacci Retracement level. It was also an important point since it was along the 100-day moving average.
The Relative Strength Index (RSI) and the MACD indicators have also pointed upwards, signaling that there is momentum.
Therefore, the outlook for the fund will point to more gains, with the next point to watch being the year-to-date high of $257. A move above that level will point to more gains since it will invalidate the double-top pattern that is often a bearish reversal pattern.
The post Is the SPDR GLD ETF a buy as gold prices bounce back? appeared first on Invezz