Gold is the go-to haven that investors and traders turn to when they're unsure about the performance of other assets.
However, OANDA senior trader Stephen Innes says trading in gold has been muted recently, even though it has been in the news a lot.
"Gold has been centred on the Fed Reserve interest rate speculation," he says. "That's why we've been witnessing it hovering around the $US1200 ($1550) range, which is a common range we seem to have been stuck in for a while. The bottom side has been around $US1160, while the top side has been $US1230."
The $US1200 level has been a significant level for an extended period and remains a key mark that currently offers reasonable resistance to higher prices. It will probably be external factors that determine which level will be severely tested next, Innes says.
He adds that some people believe the US dollar has a play in the price of gold but says traditionally all commodities are sensitive to movements in the US dollar. "If I take the US dollar out of the equation I think it's more correlated to the US interest rates right now and that's where we're seeing most of the speculation in the gold market."
Once the Federal Reserve starts raising interest rates again, Innes believes a trend will re-emerge.
"Then traders will revert to the fundamental drivers in the gold market, such as the inflation outlook," he says. "This is the big driver in gold prices, as when inflation rises people flock to gold as a hedge. Geopolitical uncertainties are another big driver."
