Gold prices turned into a corrective mode after a short-lived rally towards the $1,611 figure, where the March 2013 highs lie. The precious metal was driven higher amid a widespread risk aversion following the negative developments on the geopolitical front. After US airstrike killed the Iranian military leader Qasem Soleimani, and Iran retaliated by firing ballistic missiles at Iraqi air bases housing U.S. forces, investors were spooked by a threat of a full-blown war in the Middle East. Against this backdrop, gold demand picked up strongly amid a massive risk aversion. 

Once Trump in his recent speech calmed down the global markets by his relatively peaceful rhetoric, risk sentiment started to improve, with most global stocks turned positive. As such. Demand for safe-haven assets like gold, the Japanese yen and the Swiss franc has waned. As a result, the yellow metal had to retreat from the above mentioned long-term highs, down to the local support $1,540 which capped the intraday bearish correction.

  Heightened volatility in the market suggests the bullion could both spike again and extend the decline from the recent tops, depending on the geopolitical developments. But judging by Trump’s tone and his unwillingness to initiate a war, it looks like risk sentiment will continue to improve in the near term. In this context, gold may suffer further losses in the short term. At the same time, as long as geopolitics remains in market focus, bearish risks for the safe-haven metal will likely be limited as investors may express a somehow cautious tone, fearing another escalation in the Middle East. 

From the technical point of view, the precious metal remains within a bullish trend despite the recent retreat. As long as the prices stay above the 100-dailymoving average at $1,495, upside risks prevail in the gold market. The immediate important support comes around $1,520. Meanwhile, another wave of risk aversion could bring the bullion back to the recent multi-year highs above $1,600. For now, it looks like the metal will continue its consolidation around the current levels. 


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