The gold market started the week off on the wrong foot today. The yellow metal declined and spot prices slid below the key $2,000 level. Although the price is not far from this level, the bears may see some renewed reasons to sell in the days ahead given the technical breakdown seen today. Despite this technical breakdown, the market remains well supported with a strong uptrend in place on the daily chart. The bears still have significant work to do to negate the current trend higher.
Many investors are wondering if the gold market has what it takes to challenge its previous all-time highs. The market remains within a day or two of reaching those previous highs and could challenge them quickly if the right circumstances are present. The ongoing war in Ukraine and tensions between the East and the West could ignite a very strong rally in gold that could see the metal not only hit previous all-time highs but move far beyond them, possibly even into the $3,000 per ounce range.
The tensions between East and West have not gotten a lot of attention as of yet. With Russia possibly moving tactical nuclear weapons into the field of battle, that could change and change quickly. Russia has been a source of tension for the globe in recent months and may continue to act as such in the months ahead. President Putin’s leadership has been called into question and rumors exist regarding his health and longevity. Any big news out of Russia has the potential to move markets and shake things up significantly on the global geopolitical scene.
Gold investors are paying close attention to inflation and the Fed. The Federal Reserve is now expected to hike rates one more time next month. If the end of the road for rate hikes becomes clear, gold could stand to benefit handsomely. A Fed that hints at rate decreases or suggests that lower rates may be warranted could set the stage for a massive rally in gold that could see the metal easily eclipse its previous all-time highs and beyond. A weakening dollar may also play a large role in any gold rallies and could give investors even more reasons to buy.
The dollar has been the topic of some debate in recent months as well. More nations have made moves to trade outside of the U.S. Currency, in what may be another clue that the dollar’s days as number one may be drawing to a close. If the dollar were to lose its place as the global reserve currency of choice, its value of it could weaken in spectacular fashion. That could, in turn, drive demand for gold even higher and fuel much higher values for gold than current levels. The Federal Reserve and its plans going forward may also be a prime catalyst for a dollar downtrend in the year ahead.