Gold prices $XAU /USD kept climbing during Tuesday’s trading, aiming for the 4,530 dollar level, supported by a sharp drop in oil prices, which helped ease inflation fears and reduced the chances of further tightening in monetary policy.
This recovery comes after a limited pullback the precious metal experienced earlier this month, amidst a relative weakness of the US dollar and improved appetite for safe-haven assets.
The decline in oil provides a strong boost for gold.
The drop in oil prices has become one of the key factors supporting gold’s movements recently, as lower energy costs reduce inflationary pressures within the economy, prompting markets to reassess their expectations regarding upcoming Federal Reserve moves.
With the odds of rate hikes diminishing, gold is becoming increasingly attractive as a safe haven and a hedge during times of economic uncertainty.
Brent crude has dipped below the $72 per barrel mark, hitting its lowest level in several weeks due to concerns over slowing global demand and potential supply increases, which has helped gold break through the $4,500 level after several previous attempts.
Technical outlook for XAU/USD
Technically, gold is currently trading above the 50-day moving average, reflecting continued positive momentum in the short term.
The next resistance is seen near $4,550.
Then there’s the significant psychological level at $4,600.
Meanwhile, the key support is positioned at $4,470.
The Relative Strength Index (RSI) also indicates there’s more room to rise before reaching overbought territory.
What does this mean for investors?
The current rise in gold reflects a shift in market expectations regarding inflation and monetary policy. If oil prices continue to fall and the dollar remains weak, gold could maintain its upward trajectory in the near term.
However, markets remain sensitive to any hawkish comments from Federal Reserve officials or any sudden rebound in energy prices, which could lead to rapid price fluctuations.
In summary
Gold is currently benefiting from falling oil prices and declining inflation fears, which has restored positive momentum for the precious metal and pushed it towards higher levels. While the technical picture appears supportive of further short-term gains, the market direction will remain tied to oil movements and central bank statements in the upcoming phase.
