Gold (XAU/USD) has recently pulled back from its all-time highs, reaching $4,580 before climbing above $4,600 during European trading on Thursday. The price of this precious metal benefits from a weaker US Dollar, even with easing geopolitical concerns and strong US economic data.

Geopolitical Factors and Market Trends

The US President has toned down his stance against Iran, lowering the chances of immediate military action. Gold remains close to record levels, supported by the US Dollar’s decline, encouraging data from the Eurozone and UK, and cautious Japanese interventions affecting the Yen. Currently trading at $4,620, gold has support in the $4,670-$4,680 range, but bullish momentum is fading. Indicators like the Relative Strength Index (RSI) show signs of bearish divergence, while the MACD indicates weakening upward momentum. Bears are looking to push below $4,570 to trigger further corrections. If gold rises above $4,630, Fibonacci extension targets are set at $4,689 and $4,763. Historically, gold has been a reliable store of value and medium of exchange, especially during times of uncertainty. It serves as a hedge against inflation and currency depreciation, remaining unaffected by specific issuers or governments. Central banks maintain significant gold reserves to enhance economic stability. In 2022, they purchased 1,136 tonnes of gold, reaching a record high. Emerging economies are quickly increasing their reserves, showcasing gold’s lasting appeal as a stable and diverse asset amid changing US Dollar conditions.

Price Factors and Investment Strategies

Gold is currently near its all-time high at approximately $4,620, but the recent rally is beginning to lose force. While a softer US Dollar provides some support, the easing geopolitical tensions are reducing immediate demand for gold as a safe haven. This mixed outlook indicates we may face a period of consolidation or potential corrections in the coming weeks. It is important to remember the continuous purchasing by central banks that characterized the market through 2024 and 2025, which creates a solid support level for gold prices. Recent data from the World Gold Council shows that global central banks added over 800 tonnes to their reserves last year, continuing the strong pace from 2022 and 2023. This ongoing demand, combined with inflation remaining above the Fed’s target despite recent rate cuts, limits the chances of a sharp price drop. The bearish divergence on the RSI and the MACD crossover are crucial signals indicating that this rally may be losing strength. Traders anticipating a pullback might consider buying put options with a strike price under the critical $4,570 support level. A less aggressive strategy would involve setting up bear call spreads—selling calls near the $4,690 resistance while buying further out protection—to profit if price remains below this level. For those with existing long positions, it could be wise to hedge profits against a potential sharp reversal. Purchasing protective puts below the current price can help secure gains while still allowing for future upside. Given the current calm might not last, a long straddle—buying both a call and a put—could be beneficial if there’s a significant price swing in either direction. We’ve witnessed similar patterns before, especially during the inflationary period of 2022-2024 when gold initially struggled with rising interest rates before ultimately climbing higher. The market correctly anticipated the central banks’ shift towards easing policies in 2025, which fueled the latest rally. Therefore, any drop toward the $4,500 level should be viewed as a buying opportunity for long-term positions rather than a trend reversal. Create your live VT Markets account and start trading now.

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