Gold Price Up With Support from Safe Haven Buying

Summary:
• The yellow metal has defied rising yields US Treasuries and underlying interest rate rhetoric, with support from Middle East tensions.

Gold prices have edged up on Monday, fueled by safe haven buying. The precious metal was +0.16% to trade at $2169 at the spot market, while futures gold traded at $2164, after rising by 0.13%. Nonetheless, gold is still under pressure from US Treasury Bonds, whose yields on five-year and ten-year securities have returned above 4.300%.

Gold is currently in correction after a nearly month-long uptrend that ended on March 11. This week could hold the key to the yellow metal’s trajectory, as interest rate announcements come out of the US, the UK and Japan.

China’s industrial production rose beyond expectations in February, eating into prospects of increased inflows into gold investment from the world’s second-largest economy. China’s economy defied  the gloomy picture painted by economists to grow its industrial production by 7.0% YTD in February, substantially exceeding the forecast figure of 5.3%.

However, gold could yet get tailwinds from safe haven investments as geopolitical risk factor rises in the Middle East. Israel insists it will proceed with a ground offensive into Rafah, an act described as a “red line” by US President Joe Biden. In the meantime, the country’s military staged an overnight attack on Gazah’s Al-Shifa hospital, raising the stakes on a potential escalation during the Muslim Ramadhan month.

Prospects of changes in interest rates by the Federal Reserve, the BoJ, and the BoE have subsided over the last week, and this will provide support for the dollar. Elsewhere, the Eurozone’s month-on-month and year-on-year CPI readings for February met expectations, leaving fundamentals relatively unchanged on that front. The headline inflation came in at 2.6% YoY and 0.6% month-on-month, while Core CPI (excluding food, energy, alcohol, and tobacco) was at 3.1% YoY and 0.7% month on month.

Technical analysis

Gold price pivots at 2150, and the RSI indicates control by the buyers. The bullish-leaning market positions the next resistance at 2164. However, a continuation of control by the buyers at that mark will breach the resistance and meet the next resistance at 2172. However, a move below the pivot price will shift control towards the sellers, with support at 2146. A continuation of control by the bears at that point will break the first support, invalidate the upside view and potentially test 2141.