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Yesterday marked a correction for the gold market; however, today the precious metal showed signs of recovery. This brief decline, following a prolonged period of growth, did not undermine the fundamental reasons for interest in gold as a reliable safe-haven asset.
Today's revival of buying demand appears linked to ongoing purchases by the People's Bank of China. These actions by the Chinese central bank, aimed at increasing gold reserves, are traditionally viewed as a signal of increased participation by smart money in the market.
Despite short-term fluctuations, the long-term trend of a strengthening dollar and expectations of rising US interest rates, which previously pressured gold prices, are beginning to give way to other, more significant factors. These primarily include reduced geopolitical risks and expectations of a peace agreement between Iran and the US.
Currently, the price of gold is approaching the $4,720 per ounce mark, maintaining bullish prospects.
It should be noted that the price of gold has fallen by about 11% since the start of the conflict, as the near-total closure of the Strait of Hormuz and the subsequent shock in energy prices heightened concerns about rising inflation, which could lead to higher interest rates for an extended period. Rate hikes and a strengthening US dollar negatively affect gold prices since it does not yield interest and is priced in US dollars.
Today, traders will be watching changes in US employment data, expected to be released in the second half of the day. This will provide insight into the trajectory of near-term interest rate changes. Some Federal Reserve officials downplayed the likelihood of a return to monetary easing, as suggested in the statement after last week's monetary policy meeting. If the US labor market data is strong, pressure on gold may return.
Regarding the current technical picture of gold, buyers need to overcome the nearest resistance at $4,771. This will allow targeting $4,835, above which it will be quite challenging to break. The farthest target will be around $4,893. In the event of a decline in gold prices, bears will aim to take control over $4,708. If this is achieved, breaking the range could deliver a significant blow to the bulls' positions and push gold down to a low of $4,656 with the potential to reach $4,607.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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