Gold reaches weekly highs: geopolitical factors and interest rate cut bets drive price

Favorable Factors Combination Supports the Appreciation of the Yellow Metal

Gold (XAU/USD) continues its appreciation trajectory, reaching levels not seen in a week during Tuesday’s Asian session. The precious metal finds firm demand in the US$ 4,428-4,427 region, reflecting a convergence of elements that reinforce buyers’ optimism.

The current price dynamics are mainly driven by three pillars: the perception of high geopolitical risk, expectations of monetary easing by the Federal Reserve (Fed) of the US, and the relative weakening of the US dollar (USD). These factors, combined, create a conducive environment for continued gains in the gold market.

International Tensions and Political Uncertainties Strengthen Demand for Safe-Haven Assets

The geopolitical situation remains a significant catalyst for capital flows into gold. Reports of possible US military interventions in Venezuela, escalation of tensions between Saudi Arabia and the United Arab Emirates, as well as the ongoing Russia-Ukraine conflict, keep investors on alert.

These concerns about regional stability reinforce the narrative of seeking safety, increasing demand for gold, which historically functions as a safe haven during periods of political and economic uncertainty.

Market Prices in Fed Interest Rate Relief for the Coming Months

Traders maintain strong bets on two interest rate cuts by the US central bank later this year. This dovish expectation gained traction after the release of the mixed Purchasing Managers’ Index (PMI) on Monday, which did not pose significant resistance to the easing scenario.

In fact, while the S&P Global manufacturing PMI remained at 47.9, signaling contraction, the prospects of reduced financing costs by the Fed continue to dominate market sentiment. Analysts now price in an initial cut in March, followed by additional moves until the end of the year.

The US dollar, in turn, moves away from its nearly four-week high recorded the previous day, losing ground precisely because the weakening of expectations for maintaining high rates reduces the US dollar’s relative attractiveness. Since gold offers no yield, the depreciation of the dollar favors its competitiveness.

Economic Data Calendar Keeps Focus on Friday’s Employment Report

The week is rich in US macroeconomic indicators, but traders’ attention remains focused on the non-farm employment report (NFP) released on Friday. This indicator will be crucial in providing new signals about the Fed’s interest rate trajectory and could trigger significant directional movements in both the dollar and gold prices.

Until then, the precious metal benefits from a confluence of fundamental factors that have supported its appreciation in recent sessions.

Technical Perspective: Barrier at US$ 4,445-4,450 Emerges as Next Target

From a technical standpoint, breaking the (SMA) 100-hour Simple Moving Average during the night and subsequent movement beyond the US$ 4,445-4,450 congestion zone are important signals for the optimists. The Relative Strength Index (RSI) is at 68, close to the overbought zone, while the MACD histogram showed a positive inflection, with the MACD line operating marginally above the signal line.

This scenario suggests constructive momentum, although the pressure for a new push above the 70 mark on the RSI remains relevant to confirm the bullish outlook. The dynamic floor established by the 100-hour SMA, at US$ 4,373.28, should contain significant retracements in the short term, maintaining the positive trend as long as the price stays above this level.

A sustained break of the resistance barrier at US$ 4,445-4,450 would open space for more substantial gains, consolidating the appreciation movement of gold in the upcoming sessions.