Gold Price Analysis: XAU/USD bulls eye a break towards all time highs, riding support

Gold price is trading around $2,050 and higher by some 0.5% on the day. The bulls have been in the market in a risk-off period in higher volatility markets of late and it has been climbing for a third-straight session as safe-haven buying.

We have had interest-rate decisions and dovish rate hikes from the Federal Reserve and European Central Bank giving the Yellow Metal a boost as well. Both central banks raised interest rates by 25 basis points but both have signaled that they might be ready to pause.

Analysts at ANZ bank explained the on-goings of teh ECB:

´´The European Central Bank (ECB) raised its key policy rate by 25bp to 3.75%. The ECB also announced that it would increase the pace of the run-down of its asset purchase programme to around EUR25bn per month from July, from the current pace of EUR15bn per month,´´ the analysts said.

´´Ahead of the ECB meeting there was some expectation of a larger lift in rates. However, President Lagarde pointed to the weakness in monetary aggregates and tightening in bank lending standards as reasons for a more cautious approach. The ECB is still waiting to see the impact of previous tightening in the financial sector to be transmitted to the real economy. The lagged impact of monetary policy tightening makes it challenging for central banks to know exactly when sufficient tightening has been deployed to get the result they are aiming for.´´

Meanwhile, analysts at TD Securities warn not to sell into the gold rally. 

´´Don't fade the rally in gold,´´the analysts started in a note. 

´´The melt-up in prices overnight associated with ongoing stress in the banking sector revealed that traders are willing to deploy their hoard of dry-powder.´´

´´After all, our gauge of discretionary trader positioning still suggests this cohort has yet to participate in the rally in gold. Interestingly, discretionary trader positioning has historically lagged expectations for 12m forward fed funds rates by two to three months, suggesting the rates market view is still likely to translate to higher interest in gold,´´ the analysts explained. 

´´Given our view that pricing for cuts is likely to firm into next year, this feeds the view that gold markets may have just entered into a new bull market with prices near all-time highs. In the meantime, algorithmic positioning may well be 'max long', but given the bar for liquidations has notably increased, CTA trend followers are unlikely to keep prices from printing new all-time highs. Further, retail demand for bullion remains resilient amid ongoing bank stress and the latest central bank data still shows little sign of buyer fatigue,´´ the analysts concluded.

Gold technical analysis

The price is jammed into a resistance area near $2,050 and supported by the micro trendline that rides the $40.00s. A break of the $47.00s opens the risk of a move to test $2,032.10 support structure. On the upside, the all times highs will be a target around $2,075.%