The price of gold against the US dollar (XAU/USD) rose by over 1% on Monday, reaching $3,243 at the time of writing. There are three main factors contributing to this increase. First, tensions are rising in the Middle East as Israel begins a large ground offensive. This follows US President Donald Trump’s recent visit to the Middle East, where he did not visit Israel. The second factor is the bond market, as some pension funds and Fixed Income investors may have to restructure their portfolios due to Moody’s downgrade of the US’s credit rating from ‘AAA’ to ‘Aa1’ on Friday. This could potentially affect the Federal Reserve’s decisions and lead to higher interest rates for US debt. Lastly, the upcoming phone call between Trump and Russian President Vladimir Putin could impact gold prices if a breakthrough is made in their discussions about peace talks in Istanbul.
Some may see Moody’s downgrade as a temporary fix, but it highlights a growing issue in the US – the expanding debt and lack of income to cover it. This needs to be addressed, as it could have a significant impact on the economy, especially with the Fed’s limited options and rising interest rates. On a technical level, the $3,245 mark is acting as a strong resistance, followed by the $3,252 and $3,301 levels. If the price manages to break through, a major catalyst would be needed for it to continue rising. On the downside, the daily Pivot Point at $3,203 and the significant level at $3,200 could act as support, with the potential for a dip to the $3,150 area, including the April 3 high and intraday support at $3,155, before reaching the 55-day Simple Moving Average at $3,151.