Several supportive factors are driving gold higher. The precious metal has been on a tear, hitting a three-month high and approaching a new record high. Safe-haven demand and technical buying are driving the rally.
The market remains concerned about the new US presidential administration's trade and foreign policy, especially new tariff measures.
Another reason gold prices are trading at record highs is the European Central Bank (ECB) cutting interest rates across the board.
In a widely expected move, the ECB cut its three key interest rates by 25 basis points. The deposit rate, main refinancing rate and marginal lending rate will fall to 2.75%, 2.90% and 3.15% respectively.
"In particular, the decision to lower the deposit rate – the interest rate the Governing Council uses to adjust the monetary policy stance – was based on an updated assessment of the inflation outlook, the evolution of underlying inflation and the effectiveness of monetary policy," the ECB said in its monetary policy statement.
The gold market posted a strong rally ahead of the ECB decision and remained well supported afterward. Gold’s performance against the euro was in line with broader currency trends, with the precious metal approaching a new record high against the US dollar.
Spot gold tested $2,790 an ounce after U.S. pending home sales disappointed with a 5.5% drop in December, according to Ernest Hoffman, market analyst at Kitco News.
Data from the National Association of Realtors (NAR) released Thursday showed that its index of pending home sales in the United States fell 5.5% in December, following a revised 1.9% increase in November.
The data was much worse than forecast, with economists expecting a 0% change. All four regions in the US recorded declines in transactions compared to the previous month, with the West seeing the sharpest decline.
On a year-over-year basis, pending home sales fell 5%, versus forecasts for a 4% increase and an unadjusted 6.9% increase in November. All four regions posted year-over-year declines, with the Midwest posting the largest decline.
Technically, April gold futures continue to trend up, with buyers in the upper hand in the short term. The upside momentum is heading towards the key resistance level of $2,846.60/oz. A break above this level could see gold continue to test the $2,850/oz level.
On the other hand, sellers are looking to push prices below strong technical support at $2,750/ounce. The immediate support is at $2,800/ounce, followed by the previous session low of $2,794.9/ounce.
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