Gold Continues to Rise as Tensions in the Middle East Escalate
The gold (XAU) price held steady near 2,400 on Thursday as persistent tensions in the Middle East offset the negative impact of tight US monetary policy.
Everett Millman, the chief market analyst at Gainesville Coins, commented on the current situation in the gold market:
"When there are geopolitical tensions, the natural response is for investors to flee to gold, which is happening now. If the conflict further escalates, prices could go north of $2,500–$2,600, and if there is a ceasefire, then they could fall to $2,200. Central bank purchases are also placing a floor beneath the prices."
It is now clear that investors' interest rate expectations driven by US macroeconomic statistics play a nominal role in the precious metals markets. XAU/USD stayed elevated despite yesterday's data showing that US weekly jobless claims were unchanged, remaining at low levels. The gold price rose despite investors having already drastically reassessed the chances that the Federal Reserve (Fed) would cut rates in the summer. According to the CME FedWatch Tool, traders expect the first interest rate cut to be delivered only in September. Still, tight US monetary policy exerts downward pressure on XAU/USD. Thus, better-than-expected economic data will likely have a bearish impact on the pair, but a major sell-off in gold is now unlikely.
XAU/USD rallied to over 2,410 in the Asian trading session as news of Israel's attack on Iran prompted investors to seek safety. However, XAU/USD lost most of its gains in the early European trading session. As before, traders should closely follow any new developments in the Middle East. Risk aversion may quickly affect the market if a wider regional conflict develops, pushing gold towards new highs. Conversely, easing tensions may put downward pressure on XAU/USD, possibly pushing the pair below 2,300.
"Spot gold may test resistance at $2,424 per ounce. A break above could open the way towards the $2,446–$2,460 range," said Reuters analyst Wang Tao.
Euro Remains Near 5-Month Low
The euro (EUR) lost 0.51% on Thursday as the US Dollar Index (DXY) continued to rise on persistent tensions in the Middle East and upbeat US macro statistics.
The Federal Reserve's (Fed) stance on monetary policy has turned more hawkish due to better-than-expected macroeconomic data and persistent inflation. Thus, investors had to rethink their expectations of a rate cut by the Fed. Meanwhile, the European Central Bank's (ECB) monetary policy outlook remained broadly unchanged, pushing EUR/USD lower. Currently, traders still price in a nearly 100% probability that the ECB will cut interest rates this summer, while the Fed is expected to deliver the first rate reduction only in September.
"Once the ECB starts cutting, it'll be apparent that global central banks will face divergent monetary policy easing cycles, and that will just exacerbate the strength of the dollar against the euro and other major currencies," said Carol Kong, the currency strategist at Commonwealth Bank of Australia.
However, if eurozone data exceeds forecasts, the ECB may be forced to delay a rate cut. This scenario seems probable, given that ECB officials have been giving some hawkish signals lately.
EUR/USD was falling during the Asian and early European trading sessions. Today, the economic calendar is rather uneventful, so EUR/USD may remain under technical bearish pressure. If the conflict in the Middle East escalates, the US dollar will rise due to increasing safe-haven flows, pushing EUR/USD lower. The key levels to watch are 1.06000 and 1.07000.
Bitcoin Remains in a Downward Trend Ahead of Today's Halving
Bitcoin (BTC) is currently in a downward trend, struggling to break above the 63,000 resistance level. If BTC/USD declines below the important support level, it may further drop significantly.
In a recent CryptoQuant Quicktake post, an analyst examined the behavior of Bitcoin miners ahead of the upcoming halving event. Halving is a periodic event that halves the block rewards miners receive, significantly impacting their revenues. With the next halving this evening, this adjustment is crucial since the other source of miners' income—transaction fees—has historically been low on the Bitcoin network.
"One of the common dynamics that occurs in every cycle of cutting the issuance of new BTC is the significant selling pressure exerted by miners," explains the quant.
The Exchange Flow metric helps to track the selling pressure on BTC/USD. This metric monitors the amount of Bitcoin transferred from miner-linked addresses to exchange-connected wallets, providing insights into the flow dynamics ahead of halving. The analyst points out that Bitcoin miners may have already conducted sales, according to a spike in their exchange inflows in February. The quant believes that if this pre-selling has indeed occurred, it could temporarily boost the pair.
BTC/USD slipped below the crucial 60,000 support level today, decreasing by 5% in two hours due to rising geopolitical tensions in the Middle East. Bitcoin long positions worth $34 million have been liquidated in the past few hours. Bitcoin's price briefly dipped to 59,700 and then rebounded towards 62,700. Notably, a decrease below 59,000 could trigger liquidations of approximately $243 million in long positions, according to CoinGlass data.