The gold price has recovered strongly over the past 3 trading sessions after coming perilously close to touching the $1300 mark and for the time being it seems as this level has becomea solid support base.
The reason for the rally has been put down to the positive developments regarding trade negotiations between China and the US which has left little appetite for the US dollar which in turn has benefited gold.
US President Donald Trump has said he is willing to extend the deadline of Mrch 1st to let negotiations to continue which many in the market take as a sign that the US President is really pushing to make sure a deal goes through.
"Alleviation of risks around the trade talks has certainly benefited the markets," said ANZ analyst Daniel Hynes.
There are also fears that the Fed may have raised rates to high and too soon which may see the US economy face substantial problems as the year unfolds and this adds to the belief that the Fed is done this time around with their rate hiking cycle and may have to drop rates in order to starve off a recession.
Once this thought process gathers more momentum gold should receive a significant boost.
“The dominate thinking of speculators is that [the] U.S. Federal Reserve is on the very verge of easing monetary policy,” said Ned Schmidt, editor of the Value View Gold Report. “General this view is built on belief that [the] U.S. economy is about to fall into a recession this year.” He added.