The gold market is seeing a nice rebound on Thursday after some recent selling pressure. Spot gold prices are higher by $14.50 per ounce just after the close of the pit session. Bulls stepped in to buy the recent dip following some technical selling pressure, and friendly outside market postures in both the dollar and crude oil also gave the yellow metal a boost. The day’s gains may have been limited by higher treasury yields, however, as they did tick higher throughout the session. The metal remains a ways away from the next key technical area at $2,000 per ounce. The bulls are still showing signs of life, however, and this area may yet be tested once again.
The gold market has been mostly sideways for several weeks now. The war in Ukraine continues to rage on, but without any new, significant news coming out of the region, the gold bulls may be forced to look elsewhere for a bullish catalyst. The potential threat of a nuclear confrontation, however, may keep gold from falling too far if it does decline. The war between Israel and Hamas has taken center stage in the financial media in recent weeks. This conflict has entered what could be a very bloody stage, as Israeli defense forces have marched into Gaza. This region is full of non-combatants and innocent civilians, who have now been without power and internet for some time. Water and food shortages are also a problem in the area, and without some type of aid being able to get into the region, more innocent civilians could perish as a result.
In addition to the ongoing global military conflicts, the gold market is also paying close attention to inflation and interest rates. Inflation is down from where it was several months ago, but it remains well above the fed’s desired target of 2% annualized. The stubborn inflation may force the Fed to continue hiking interest rates even further, or it could give the Fed reason to hold rates steady at current levels for longer than expected. Either way, the gold bulls may not come out en masse until the Fed signals that it is done raising rates or that rates may begin to be eased again.
The gold bulls remain in control of the market, but not by much at this point. If the bulls are unable to exhibit more power and do it soon, the bears may see an opportunity to pounce and retake control on the daily chart. The two same areas, $2,000 for the bulls and $1,900 for the bears, remain key technical levels that could dictate market direction for the months ahead. A close above or below these levels may signal to market participants that it is OK to enter the long or short side of the market. These momentum players could then drive the market in that direction for an ongoing move that could last several months or more.