Gold and silver markets have experienced notable fluctuations following a particularly volatile week. Gold has been on an impressive rally, consistently reaching new highs, and this trend continued with an intra-day swing of $98. This level of market volatility has only been surpassed by the significant rally last December, which briefly pushed gold prices above $2,150 an ounce.
Currently, the market is behaving differently; there’s no widespread anticipation of a major correction. Many investors were caught off guard by the sharp increase in March, having anticipated a more substantial dip to re-enter the market.
The lack of a significant pullback has kept the market on edge, with many investors eagerly looking for opportunities to buy during any dips. Analysts suggest that gold has initial support at $2,350 an ounce, with further notable support at around $2,285 and $2,150 an ounce, respectively.
Despite a slight sell-off on Friday, gold closed the week strong at $2,360.20 an ounce, buoyed by persistent inflation pressures. These conditions may compel the Federal Reserve to maintain aggressive monetary policies for an extended period. With the U.S. Consumer Price Index rising 3.5% over the past 12 months and 10-year U.S. Treasury yields near a five-month high, the cost of holding nonyielding assets like gold increases.
Nevertheless, gold remains an appealing option for investors looking to hedge against financial uncertainties. According to Kristina Hooper, Chief Investment Strategist at Invesco, gold continues to be an attractive hedge against fiscal excess and rising global debt. David Rosenberg, a respected economist, also advocates for a significant overweight in gold within diversified portfolios, citing its protective qualities against geopolitical and fiscal risks.
The solid demand for gold is underscored by continued purchases by central banks and sustained interest from the People’s Bank of China, which has increased its gold reserves for the 17th consecutive month. Despite some generalist investors overlooking gold, the ongoing financial market uncertainties make a compelling case for gold as a safe-haven asset.
