Geopolitical turmoil and Bon Yields, opposing factors for gold price

Author: Ahura Chalki

Thursday, 09 June 2022 Number of words: 318 Study time: 2 Minutes Views: 202

Gold price analysis

Geopolitical tensions and rising stagflation risks support the safe-haven assets, including gold. Moreover, that is why some professional analysts predict that the price of gold may again test the $2,000 after testing in the first quarter of this year. 

Gold is under pressure but holding the demand as stock markets tumbling 

Central banks' policies are significant for Gold prices. In Japan, BoJ's accommodative monetary policy continued to weigh on the yen, sending the yen out but supporting the stock markets, which is not gold price favor.

However, except for Japan, which has special conditions, higher inflation boosts the market's consumption of physical gold in other economies to give a solid outlook for this precious metal.

This higher inflation made RBA increase the rates by 50 bps earlier this week, and ECB ended its bond purchases program with planning to start raising rates from the July meeting. Now the market is waiting for BoE and FED to increase the rate by another 25 and 50 bps next week, respectively. These rate hikes will put more pressure on stock markets and helps the gold price rise.

On the other hand, raising the rates and weakness in the stock markets will increase the bond yields and the US dollar, killing the gold price. Therefore, the same factor increasing the gold demand can put pressure on its price, which is why markets can get a bit confused. However, since geopolitical tensions are still there, overall conditions will benefit bulls more than bears.

From the technical point of view, in the daily chart, it is in a slight downtrend, but recently priced moved back above 20 DMA, which signals the possible end of the downtrend in this range. The market volume is also decreasing to help the idea of bears' weakness.

The asset has strong resistance at 1,870, and for any longer-term upturns, we have to breathe above that, while breaching under 1,823 US dollars can confirm the continuing downtrend. 

Gold price analysis

Source: IFC Markets
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