After unexpected December US CPI inflation data was released on Thursday, gold saw an increase in value on Friday. The US and UK carried out airstrikes on Iran-backed Houthis’ targets in Yemen in response to shipping attacks in the Red Sea. In retaliation, the Yemeni Group has threatened to target all US and UK interests and also those linked to Israel.
The airstrikes, which involved over 70 strikes on Yemen targets, have raised concerns about potential fallout from the Israel-Hamas war. If the situation escalates, it could potentially involve other regional powers more directly. Earlier in the week, the Houthis launched significant shipping attacks and Iran seized an oil tanker off the Coast of Oman. The US government has hinted at the possibility of more strikes on the Houthis targets.
The geopolitical tensions in the Middle East have caused Brent Crude oil to top $80 on Friday. This escalation has prompted traders to reprice geopolitical risk premium back into oil prices, contributing to a rise in value.
Despite an increase in gold prices, investment demand for the commodity remains weak. Gold ETF holdings have been falling for a consecutive seven days, reaching the lowest level in the last three years.
Looking ahead, next week’s crucial US data include retail sales advance, industrial production, housing market index, housing starts, weekly jobless claims, and other important indicators. Similar data is also set to be released in Europe and China, providing crucial insights into the global economy.
The author, Praveen Singh, suggests that gold will likely find support in the Middle East geopolitical concerns and the recent US-UK airstrikes. However, if tensions in the region are contained, the yellow metal could see a slide in value, particularly as the US economy continues to show encouraging macroeconomic data. Key support levels for gold are identified at $2040, $2015, and $2000, while resistance levels are estimated at $2075 and $2100.
Additional Insight:
The situation in the Middle East and the potential for further conflict is likely to keep gold prices supported in the short term. However, if geopolitical tensions ease or macroeconomic data improve, the precious metal may face downward pressure. Investors will be closely monitoring economic indicators and geopolitical developments to assess the trajectory of gold prices in the coming weeks.
