On Friday (January 24), gold prices continued their upward momentum, reaching a multi-month high of $2,778 in the European market before reaching $2,790, which is just shy of the historical high. The key factors driving up gold prices include heightened risk aversion, a weakening dollar, and global economic uncertainty.
Recently, remarks from the US President eased market concerns about trade and inflation but also sparked worries about potential economic consequences, further boosting demand for gold as a safe haven. Additionally, calls for lower interest rates have pushed US Treasury yields down, with the dollar's exchange rate hitting a one-month low, providing strong support for gold prices.
The gold market is currently experiencing a trend of increases for the fourth consecutive week, with market sentiment remaining optimistic. Meanwhile, investors are closely watching the soon-to-be-released global Manufacturing Purchasing Managers' Index (PMI) data for short-term trading opportunities. The rise in risk aversion suggests that gold remains the preferred asset for investors hedging against economic uncertainty.
Technical Analysis:
From a technical perspective, gold prices surpassed the key resistance area of $2,720-$2,725 on Thursday, further confirming a bullish breakout in the gold market. However, technical indicators show that gold's Relative Strength Index (RSI) is approaching the overbought zone, suggesting that the market may experience a short-term technical correction.
Currently, gold prices have significant support in the $2,760-$2,758 region. If the price falls below this support level, it might test the $2,735 region, or even further drop towards the crucial support at $2,720. This area is crucial for maintaining bullish market sentiment. Should this support be effectively breached, gold prices could undergo a more substantial correction.
On the other hand, if gold prices break through the historical high of $2,790, it is expected to further test the psychological barrier of $2,800. However, as prices approach historical highs, technical resistance and an overbought state may restrict short-term gains in gold prices.
Fundamentals and Market Expectations:
The current rise in gold is supported by multiple factors, including safe-haven inflows, declining interest rate expectations, and global economic uncertainty. Notably, the weakening dollar further strengthens market demand for gold. Meanwhile, the trend of central banks increasing gold reserves also provides long-term support for gold prices.
Although bullish sentiment is strong in the gold market, investors should be mindful of the risk of short-term corrections. In the coming days, the release of global manufacturing PMI data, along with technical support and resistance levels for gold, will be the focus of the market. For gold investors, the current market may present both opportunities and risks. In the short term, it is crucial to remain vigilant against technical corrections, while in the long term, the potential for growth in the gold market remains.
