Gold prices opened sharply higher on Monday and registered nearly seven-year highs at $1,582 as geopolitical concerns reemerged after a US airstrike killed the Iranian military leader Qasem Soleimani and Iran has vowed to retaliate. As a result of rising tensions, global stock markets turned into a safe-haven mode after a strong rally in December.
It is now the ninth day of gains in a row for gold prices, with some signs of overbought conditions emerge now. Despite this, upside risks still prevail in the gold market as concerns over the global economy in the context of a US-Iran conflict will likely persist, at least in the near term. According to the latest news, Trump said that the United States will hit over 50 Iranian sites if Tehran attacks the US assets. So, the tensions could stay elevated and lift the precious metal further.
In a wider picture, signs of improving economic conditions globally capped the upside impetus in the gold market, in addition to easing trade tensions between the United States and China, with the two countries are getting closer to resolving the outstanding trade issues after a breakthrough in their negotiations. Now, as the major central banks seem to be taking a pause in stimulus this year, worries about the state of the global economy could reemerge against the backdrop of latest developments. As a result, investors may turn to a more aggressive profit taking in the stock markets, which in turn could give the additional boost to gold prices as safe-haven demand will pick up in this scenario.
From the technical point of view, the picture looks bullish in the short and medium term. The yellow metal broke above the $1,500 in late-December, after the bullion successful challenged the 100-daily moving average. Now, these two levels serve as strong support areas for the bullion, with the immediate support comes around $1,555. On the upside, the futures may target the $1,600 figure once the current highs are broken. The bullion needs to regain the $1,580 level in order to challenge fresh tops in the near term.