Gold Prices Record Another All-Time-Highs. So What’s Driving the Yellow Metal?

Summary:
• Gold prices reached another ATH on Monday despite strong US dollar, high US Treasury bond yields and rising prospects of higher-for-longer rates.

Gold prices printed yet another new all-time highs on Monday, as safe haven buying kept demand up. The commodity reached an ATH of $2,354 per ounce at the spot market, before settling lower at $2,335 in the Asian trading session. Futures gold followed the same pattern, touching an all-time high of $2,372 before easing lower to trade at $2,352.

Gold is on a scintillating run that has seen it register new all-time highs each trading day from March 25^th. Central banks are at the core of the latest market bull run, with China’s central bank reporting on Sunday that it bolstered its vaults with gold for the 17^th straight month in March. The resilience in gold appetite points to underlying uncertainty over global geopolitics and economic trajectory, despite relatively upbeat figures from leading economies; the US, China and EU.

The US dollar and gold traditionally have inverse relationship. However, gold prices have defied a strong USD this time round, even with the DXY hovering around the 104.00 territory since March 19.  Furthermore, the yellow metal has kept rising despite high yields on US Treasury bonds-another asset class with which it traditionally has inverse relationship. Yields on benchmark 10-year and 5-year bonds are above 4.425% as of this writing. This still keep exerting downward pressure on gold prices.

Elsewhere, tensions in the Middle East have reduced in the past two days. The Israel-Hamas war has slowed down significantly, while Iran’s war rhetoric against Israel has been muted over the same period. This, too, will limit the upside for safe haven gold.  Finally, with the US Nonfarm Payrolls data beating the forecast estimates, the Fed is under lesser pressure to reduce interest rates-another factor that brings drag to gold prices.

Technical analysis

Spot gold prices pivot at 2327, and the buyers will need to keep prices above that mark to remain in control. If they succeed at that, they will encounter resistance at 2350. Furthermore, a move past that mark could build the momentum to test 2360. On the other hand, moving below 2327 will favour the sellers, with the commodity finding support at 2312. A continuation of control by the sellers at that point will likely break the support, which will invalidate the upside view. Furthermore, it will move the support further down to 2295.