XAU/USD outlook: Gold surges on fresh escalation over Greenland, $5,000 target in focus

Gold hit new record high at $4888 on Wednesday and came closer to magic $5000 barrier, which is likely to be attacked very soon, if the current conditions persist.

The yellow metal accelerated higher in past three days following escalation of conflict between the US and the European Union over Greenland, after President Trump said (and repeated many times) that Greenland will become US territory, either peacefully through agreements or by force.

The latest conflict presents the biggest threat to the unity within NATO, as well as relations between the Euro bloc and the US, as the biggest crisis in the history of two closest allies, which may cause huge negative consequences if the situation deteriorates.

However, the NATO/EU – US conflict is just one of the key factors that strongly undermine investors’ confidence and continue to prompt them into safety, with precious metals being the key assets.

The latest acceleration took less than 24 hours to move from one to another round figure barrier ($4700 to $4800) and came ticks ahead of $4900, with $5000 being in focus.

Meanwhile, the price eased from new all-time high, although traders remain cautious and so far opted for limited profit-taking, keeping the price above significant support at $4800, with today’s close above this level, to contribute to strong bullish signals.

From one side, strongly overbought daily studies continue to warn about potential correction, while on the other side fundamentals remain very favorable for gold bulls and should offset technical signals, as the metal’s price was mainly driven by fundamentals in past couple of months.

Adding to positive outlook (favors buying on limited dips) was today’s speech of President Trump in Davos Economic forum, in which he reiterated US aspirations towards Greenland, with immediate reaction of EU on suspending work on a trade deal between the EU and US, expected to further deepen the conflict and continue to fuel safe-haven demand.

Below $4800, next supports lay at $4757 (today’s low), $4700 (round-figure) and $4670 (rising daily Tenkan-sen) which should ideally contain extended dips and mark a healthy correction ahead of fresh push higher.

Res: 4860; 4888; 4900; 4932

Sup: 4800; 4757; 4700; 4670