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Gold surges again to $2,000 on strong interest

Article background

Nick Goold

Gold

Gold began the week consolidating the gains from the previous week. However, gold prices surged as tensions in the Middle East intensified, coupled with support from the 10-day moving average. This momentum peaked at $2,000 on Friday again as traders covered short positions ahead of the weekend.

Despite the consistent rise in long-term US interest rates on comments from Fed Chairman Powell and strong US economic data, the negative effect on gold was minimal. The unfolding geopolitical uncertainties spurred a rush towards the safe-haven asset, resulting in heightened demand and subsequent short-covering.

Having touched the pivotal $2,000 mark, gold may mirror last week's performance, starting with the week with a consolidation phase. Traders, however, are advised to tread cautiously. Given the recent $150 surge over two weeks and the resistance at $2,000, rising interest rates might instigate a significant price drop if the conflict in the Middle East eases.

XAUUSDDailyOct22 chart

Resistance: 1984, 2000, 2050

Support: 1946, 1900, 1884, 1836, 1809

WTI

Crude oil continued its upward trajectory last week, with growing tensions in the Middle East spurring speculative buying. While current oil flows from the region have remained largely stable, mounting concerns prevail over the potential escalation of conflict and its consequential impact on supply. A significant concern is the strategic location of the Middle East as a pivotal transit route for seaborne oil and gas cargoes. Any disruption to this route could substantially hinder the global supply chain, catapulting oil prices even higher.

Further amplifying the bullish sentiment in the crude market are the anticipations surrounding US sanctions. Market pundits are closely observing the evolving dynamics, anticipating that the US might tighten its grip on Iranian oil exports, given Iran's known affiliations with Hamas and Hezbollah. Alongside geopolitical factors, positive economic indicators, such as better-than-expected US retail sales data and a notable decline of 4.5 million barrels in US crude stocks, have bolstered expectations for WTI demand, leading to a strong close for the week.

Currently, WTI is in a solid uptrend. However, it's worth noting that a significant portion of the bullish outlook is already priced in. While the market remains focused on potential bullish developments in the Middle East, caution is required. Unless the situation in the Middle East takes a turn for the worse in the immediate future, it might be prudent for traders to anticipate a price pullback.

XTIUSDDailyOct22 chart

Resistance: 94.00, 100.00

Support: 88.50, 85.00, 82.50, 80.00, 78.50, 75.00, 70.00

Great