Gold has reached a new all-time high, now priced at $4,720. This surge is mainly due to increased caution from investors amid rising trade tensions between the US and EU. As a result, the US Dollar Index has dropped over 0.8% in the last two days. More people are turning to safe-haven assets like gold. The yield on US 10-year bonds has risen to its highest since September, reminiscent of the “Sell America” trend that began after April’s “Liberation Day.” The 100-period Simple Moving Average for gold is on an upward trend, signaling a strong bullish outlook.

Gold Trading Dynamics

Gold is trading at $4,720, maintaining bullish momentum. The RSI is close to overbought levels at 69.88, suggesting possible resistance around $4,770, linked to the 161.8% Fibonacci extension. If gold experiences a bearish reversal, we could see support around $4,640. The US Dollar has weakened against major currencies, especially with a 0.85% drop against the Swiss Franc. It has also declined by 0.63% against the Euro and 0.67% against the New Zealand Dollar. However, it still holds steady against the Australian Dollar, despite a small 0.20% drop. With gold moving firmly above $4,700, investors should focus on maintaining long positions in precious metals. This rally stems from significant geopolitical risks, particularly the US-EU trade dispute, leading to a shift away from the US Dollar. For traders in derivatives, strategies that benefit from rising gold prices and high volatility are currently favorable.

Market Fear and Inflation Hedge

Market fear has increased, evident from the VIX index, which jumped over 40% last month to close at 28.5 yesterday. Recent US CPI data unexpectedly climbed to 4.1%, deepening the “Sell America” sentiment and positioning gold as an effective inflation hedge. In this context, non-yielding safe-haven assets like gold become especially appealing. Recent data from the CFTC shows that speculators raised their net long positions in gold to a two-year high during the week ending January 13th. This pattern echoes the 2018-2019 period when increasing trade tariffs triggered a sustained rally in gold. As long as tensions regarding Greenland remain, strong support for gold is likely to continue. In the options market, rising implied volatility makes bull call spreads an attractive strategy for targeting $4,770, while also managing risk. Though the RSI is nearing overbought conditions, this isn’t usually a strong warning in a robust, news-driven trend. Any pullbacks toward the $4,640 support level could be seen as buying opportunities rather than signs of a reversal. Create your live VT Markets account and start trading now.

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