Gold held its value on Tuesday, helped by a drop in bond yields in the US and Europe after new geopolitical developments in the Middle East.
Market confidence grew when US President Donald Trump announced a temporary deal to calm tensions in the Persian Gulf. With fewer expected disruptions to the global energy supply, worries about inflation and higher interest rates decreased, creating a better environment for gold.
However, the market could face fresh pressure if the situation worsens. A stable support has been established around $4000, which should limit any downside moves.
All eyes are on central banks this week, with their decisions likely to affect interest rate expectations and gold prices.
The Bank of Japan has already raised its interest rates, which has supported Japanese bond yields and could limit gold’s potential upside. Meanwhile, investors are awaiting the Federal Reserve’s decision on Wednesday. While no policy changes are expected, the market will be watching the Fed’s updated economic projections and inflation outlook closely. If this information is seen as positive, it could build on the upward momentum gold has seen since its low on June 11.
Concerns about monetary policy could keep weighing on investment demand for gold, as shown by the money consistently flowing out of gold ETFs recently. However, continued purchasing by central banks offers strong structural support, which helps keep the medium and long-term outlook for gold positive.
From a technical perspective, gold is still trading within a set range. The all-time high from January is acting as a resistance level. Gold has dropped 22% since then and is now finding support at the 50-week simple moving average.
From a portfolio perspective, we’re holding off on buying gold for now. Prices have been too uncertain and volatile this year.
We’re waiting for a clear, long-term upward trend to emerge before we invest. While we expect the price to eventually move higher, we need confirmation before buying back in. Our next long-term target for gold remains $10,000.
For now, we believe our capital is better used in other commodities where the trends are more defined.
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