Gold is overvalued but don’t expect a price drop as Middle East tensions rise – FXTM

(Kitco News) – The gold market, pushing to inside putting distance of $1,600, could look overbought, however will stay at present ranges so long as geopolitical uncertainty dominates investor sentiment, based on one market strategist.

Escalating tensions between the U.S. and Iran have pushed gold costs to their highest degree since April 2013 and lots of analysts at the moment are conserving their eye on the $1,600 an oz. degree. February gold futures final traded at $1,565.5 an oz., up 84% on the day.

The yellow steel has rallied greater than 3.5% for the reason that begin of the brand new 12 months; costs had been propelled greater after the U.S. introduced that it killed Qasem Soleimani, commander of Iran’s Islamic Revolutionary Guards Corps (IRGC) Quds Power in a army airstrike.

In a analysis be aware revealed Monday, Hussein Sayed, chief market strategist at FXTM, mentioned that gold will proceed to shine because the battle within the Center East stays. Sayed’s feedback come as technical indicators just like the Relative Energy Index are at their highest degree since September, nicely in overbought territory.

“In occasions of political and market uncertainty, there may be no higher various to purchasing gold and regardless of trying overbought on the charts, the rally will proceed so long as uncertainty stays excessive,” Sayed mentioned.

In preliminary retaliation to the U.S. airstrikes, the Iraq authorities voted to expel U.S. troops from their nation, Iran introduced that it might not adhere to the 2015 world nuclear deal, and three People had been killed in Kenya after a jihadist group attacked a army base.

Not like earlier short-lived Center East problems with 2019, Sayed mentioned that that the most recent battle is just not anticipated to deescalate anytime quickly. Sayed added that the most recent improvement may put strain on the U.S. and world financial progress.

“2020 was alleged to be the 12 months the place the worldwide financial system bounces again to life after the US and China commerce tensions thawed and traders obtained extra readability round Brexit. Occasions over the past week have undoubtedly put this outlook in danger,” he mentioned. “Traders will stay on the defensive… as everybody now awaits a attainable retaliatory response by Iran. This might not be a direct one, however quite a protracted occasion which traders have to fastidiously calculate when figuring out their portfolio ’s danger.”