Gold is set to finish a second week on a high amid renewed buying pressure in the market. The precious metal has been trading above the $2360 an ounce level for the better part of Friday as it shrugs off dollar strength. The yellow metal hit a new two-week high and was poised to finish the week at a high of 1.3%.
According to the daily graph, the price of gold successfully surpassed the upper limit of its trading range. The week it ended at $2,344, marking a significant point where the downward trend line’s resistance met the 50-day Simple Moving Average (SMA).
This achievement marked a shift in the market’s momentum, favoring those buying gold, as it confirmed a move upwards from a pattern that had lasted for a month, forming a symmetrical triangle. Furthermore, the 14-day Relative Strength Index (RSI) remains above the 50 mark, indicating that there is still potential for further upward movement.
These positive technical signals counteract last week’s recent bearish event, following the 21-day SMA reaching the 50-day SMA after a daily closing price had crossed it from below.
Fed Cut Boost
The bullion’s upward momentum remains supported by several factors, key among them renewed bets that the US Federal Reserve is poised to cut interest rates before the end of the year. Growing expectations of two rate cuts have also triggered demand for the non-yielding assets that tend to rally on such news.
Data released on Thursday indicate that the US economy might be overheating amid the high interest rate environment. Jobless claims remained at elevated levels of 238,000 for the week ended June 15 as housing starts fell by 5.5% to an adjusted rate of 1.2777 million units, which is the lowest since 2020
Signs of a cooling US labor and housing market should keep the US Fed on its toes, keeping the prospects of a rate cut high alive. In recent weeks, gold has also benefited from interest rate cuts in other major economies, including Canada and the European Union.
Geopolitical Tension Factor
In addition to the interest rate debate, gold benefits from growing geopolitical tensions. A recent visit to North Korea by Russian President Vladimir Putin has sent the market into a tailspin. The signing of an agreement between the two nations to defend each other in case of an attack continues to fuel tensions in the market, fuelling demand for gold as a store of value.
Gold also benefits from soaring tensions in the Middle East after weeks of calmness. Israel’s warning that it is ready to follow Hezbollah into Lebanon is once again fuelling risk aversion in the market amid growing concerns that it could trigger an all-out war in the Middle East.
Strong India Demand
At the same time, the increase in gold demand from India, the second-biggest Gold consumer globally, is seen as favorable for the precious metal. The demand for gold surpassed what was anticipated in the run-up to the Akshaya Tritiya festival. This festival occurred on May 10 and is a customary lucky day for Gold investments. The World Gold Council noted that the demand was unexpectedly robust despite prices being 23 percent higher than the 2023 festival.
