Gold, silver hit fresh record highs; here's why more upside is imminent

Gold and silver continued their merry run from last year as prices reached fresh record highs on Monday. 

Investors flocked to bullion as safe-haven demand increased due to ongoing geopolitical tensions. 

Growing bets that the US Federal Reserve will further cut interest rates this year also boosted sentiment among investors. 

Lower interest rates bode well for non-yielding metals such as gold and silver as their demand goes up. 

At the time of writing, the COMEX gold contract was at $4,580.74 per ounce, up 1.8%. The contract had hit a fresh record high of $4,612.40 per ounce earlier in the day. 

Meanwhile, the silver contract was at $83.475 per ounce, up 5.3%. The contract had hit a record high on COMEX of $83.880 per ounce. 

Geopolitical tensions boost safe-haven appeal

Iran's unrest has resulted in over 500 deaths, according to a rights group's statement on Sunday. 

This comes as Tehran issued a threat to target US military bases if President Donald Trump acts on his renewed threats to strike Iran in support of the protesters.

According to a Sunday CNN report, Trump is considering various military responses in Iran, prompted by recent deadly protests within the country. 

Sources indicated that Trump may act upon his earlier threats to strike the Iranian regime if it uses lethal force against civilians.

The unrest in Iran coincides with a period of aggressive US international action under Trump, notably the ousting of Venezuelan President Nicolas Maduro and discussions around acquiring Greenland.

In a move demonstrating the continent's commitment to Arctic security, the UK and Germany are reportedly in talks to expand their military presence in Greenland. 

This action is intended to signal their seriousness on the issue to Trump.

“Uncertainty and geopolitical risks across the globe have boosted a traditional safe-haven asset like gold,” Lallalit Srijandorn, editor at FXstreet, said in a report. 

Fed rate cut hopes

Expectations for US Federal Reserve (Fed) rate cuts were reinforced by a mixed US jobs report last week, offering a degree of support to the price of the yellow metal.

Despite slower-than-anticipated US employment growth in December, which included job reductions across the construction, retail, and manufacturing industries, the labour market did not show signs of rapid deterioration, as suggested by a drop in the unemployment rate.

The expectation among investors is for a minimum of two Federal Reserve rate cuts this year, a likelihood that increases with a softer job market. 

Separately, Fed Chair Jerome Powell recently stated that the Trump administration had threatened him with a criminal indictment concerning Congressional testimony, which Powell dismissed as a "pretext" to further pressure the central bank to lower rates.

Barbara Lambrecht, commodity analyst at Commerzbank AG, said:

Bullish momentum remains intact

The technical outlook for XAU/USD (gold/dollar) favors the bulls, underpinned by several indicators, according to Haresh Menghani, editor at FXstreet. 

Over the last month, the upward price movement has been contained within an upward-sloping channel, confirming a solid short-term uptrend. 

Further supporting this positive trend is the fact that gold is trading above its upward-sloping 200-period Simple Moving Average (SMA), which is expected to act as dynamic support around the $4,325-$4,320 zone, Menghani said in a report. 

Momentum is also strengthening, as indicated by the Moving Average Convergence Divergence (MACD): the MACD line is above the Signal line and remains positive, while the histogram is widening, he added.

The broader bullish trend is supported by the rising 200-day SMA, while any market pullback is expected to find support at the channel's base, which is situated near the $4,365 level.