Gold shines the brightest when investor sentiment is bleak. Case in point is the precious metal’s recent price action, as gold prices skyrocket through the charts amid risk aversion. XAUUSD extended its rally last Friday as it closed higher to $1,550.80 after opening at $1,511.99.
Iran Announces Bounty for President Trump
Why is gold so strong? Most of it is due to risk aversion following news that US President Donald Trump ordered that Iranian General Soleimani be killed. Following the general’s death, Iran has announced a replacement for Soleimani. General Esmail Ghaani has already vowed that they would retaliate against the US. They have already announced an $80 million bounty for Trump’s head!
Political experts warn this these threats are only the tip of the iceberg. There are speculations that US bases in Baghdad and Israel may soon be targeted for attacks. Iran has also announced that it will no longer follow limits imposed by a nuclear deal in 2015 in its uranium production. Consequently, this news has prompted concerns that we could soon see a nuclear war.
These recent developments highlight gold’s reputation as a safe haven asset. Remember that unlike currencies, gold has intrinsic value. Investors understand that even in the event of a war, gold will still be valuable. In today’s Asian trading, gold prices continued to surge even further. XAUUSD opened with an $8-weekend gap at $1,558.84 before it peaked at $1587.71–the highest level we have seen since November 2013!
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Gold Price Outlook
On the 4-hour time frame, we can see that XAUUSD has some room to trade lower and still maintain its uptrend. Connecting the lows from December 20, Decemebr 24, and January 2, we can see that if risk aversion eases, gold can find support at $1,543.61. This price coincides with the 61.8% Fib level (drawing the Fibonacci retracement tol from the low of January 2 to today’s highs) and the rising trend line.
However, negative developments on the situation between the US and Iran could only fuel risk aversion even more. A break of today’s highs could mean that XAUUSD is headed to its 2012 highs at $1,789.75.
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