Gold Rally Continues

Gold prices are seeing fresh demand across early European trading on Monday with futures extending their recent rally. The market is now up around 18% off the YTD lows and is showing no signs of reversing with a combination of Fed easing expectations and rising geopolitical tensions helping keep demand well stocked here.

Fed Easing Expectations

On the US Dollar front, expectations that the Fed will press ahead with three projected rate cuts this year has weakened the Dollar outlook over the second half of the year. However, near-term uncertainty over timing on initial cuts persists given the continued strength in labour market data. Friday’s jobs data came in above forecasts once again showing that labour market gains remain robust. However, the bigger focus this week will be on US CPI. If we see a fresh fall in inflation, this should help cement expectations for a cut in June, leading gold prices higher near-term.

Geopolitical Tensions/ Safe-Haven Demand

Away from the US Dollar, gold is also being supported through safe-haven inflows as traders look to protect against various risks linked to the war in Ukraine and the growing conflict in the Middle East. Indeed, given that USD has remained fairly muted recently this suggests that the move higher in gold has been fuelled more by safe-haven inflows.

Technical Views

Gold

The rally in gold prices has seen the market breaking out above the 2221.39 level with price now testing above the bull channel highs. With momentum studies bullish, focus is on a continuation higher here while 2221.39 holds as support. Below there, deeper support is seen at 2149.72 and the bull channel lows. 

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