- Risk aversion has driven gold to new monthly maximums.
- A race towards security after Israel’s attack to Iran has triggered a search for refuge on Friday.
- The bulls of the XAU/USD focus on $ 3.440 and the historical maximum of $ 3,495.
Gold (Xau/USD) can be seen for the third consecutive day on Friday, and is on the way to a weekly rebound greater than 3%. Israel’s attack to Iran has crushed a market feeling already fragile on Friday, triggering a search for refuge that has promoted gold and all traditional refuge assets.
Israel attacked Iran with an unprecedented force earlier on Friday, bombing nuclear sites and killing senior revolutionary guard officials. Iran responded with a drone attack and abandoned nuclear negotiations with the US. The fears of a large -scale war in the region have fed an intense feeling of risk aversion.
Technical Analysis: The Bulls of the XAU/USD point to $ 3,440 before the 3,495 $ record
The technical indicators are pointing up again. RSI studies in the 4 -hour graph are high but still below the overcompra zone. The fundamental context is favorable, despite the generalized strength of the USD, and bass attempts are still limited so far.
The precious metal is quoting at the top of a wedge pattern with trend line resistance at $ 3.425, keeping the bassists below the maximum of May 6, at $ 3,440. Bulls need to clear these levels before changing their approach to the maximum historical of $ 3,495 reached at the end of April.
At the bottom, bassists remain above the previous resistance of $ 3,400 (maximum of June 5). A setback below here would bring the minimum of June 12 and the bottom of the wedge pattern, both around $ 3,345, to the focus.
4 -hour xau/USD graphics
FAQS GOLD
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of gold to rise rapidly due to its condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
