The overall structure for gold remains strongly bullish, and the escalating crisis in the Middle East will likely support gold. However, strong volatility may lead to wide moves in either direction. Therefore, traders and investors must be cautious in the short term.
Bottom Line
Gold continues to be driven by the interplay among geopolitics, the US dollar and the volatility of equity markets. The present Middle East crisis has heightened uncertainty and forced investors to response to revise their risk exposure. Short term movements may continue to be volatile with headlines affecting currencies, equities and commodities. However, the overall environment is still favourable for gold.
Persistent geopolitical risk, increasing inflation pressures due to high energy prices and weak global growth continue to provide support for safe haven assets. Therefore, if $5,090 holds and the price pushes above $5,400, gold will likely have a move towards $5,600 despite any near-term fluctuations. On the other hand, a break below $5090 will indicate further downside to the $4,700-$4,800 zone.
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