During Monday’s Asian trading session, Gold (XAU/USD) has fallen to a two-week low below $4,700 due to profit-taking. After achieving all-time highs last week from perceived political stability in the United States (US), along with Kevin Warsh’s appointment as the new Federal Reserve Chairman, there is an ongoing downward momentum towards gold.
At the same time, geopolitical risk like US/Iran tensions could support Gold as a safe-haven asset. Continued geopolitical tension may cause additional uncertainty about the outcome of the US/Iran talks, as well as about Warsh’s potential policy direction, which traders will closely follow. Rising demand for Gold from other central banks will likely help push prices higher as well.
The ISM Purchasing Managers Index (PMI) for US manufacturing will also be released later on Monday. The PMI is expected to rise again in January to 48.3 from 47.9 in December. If the data comes in lower than expected, that could push the US dollar (USD) lower and the commodity price of USD-denominated gold higher because it makes purchasing gold at current USD levels less expensive for non-US investors.
Read: Gold, Silver, and Copper Slide as Nervous Investors Turn Cautious
Gold is currently trading lower today; however, over a more extended period, it is expected to trend upwards, supported above the 100-day Exponential Moving Average (EMA) on the daily chart. On the daily chart, the widening of the Bollinger Bands indicates that a strong trend should continue to unfold.
The 14-day Relative Strength Index (RSI) shows a bullish trend but is currently hovering around its midline and may likely see consolidation or a possible short-term sell-off before continuing to upward trend. If the Green candlesticks continue to form and Gold holds above the high on February 2, at $4,885, we should see a continued attempt for Gold to break towards the $5,000 psychological level.
On the downside, the first target for Gold is at the January 19 low of $4,620. If we see further selling below that level, then it would expose the January 12 low of $4,513. The 100-day EMA is a significant level of contention for Gold, with a current price near the 100-day EMA of $4,275.
