Gold rises to a two-week high in the second day of gains. What's next

<p>Gold is traditionally strong in January and early February on buying ahead of Chinese new year celebration but this year has been an exception. That's due in large part to broader US dollar buying and rising yields in January that are a result of stronger US economic data and rate cuts being pushed back.</p><p>However geopolitical tension and the possibility that the Fed still cuts in March have helped to boost gold so far this week. It gained $10 yesterday and is up another $16 to $2047 today. That's the highest since January 15.</p><p>Technically, a minor downtrend line has been broken from the early January high and that could clear the way to $2060. In the bigger picture, gold looks like it's consolidating around these levels for an eventual break — presumably on central bank rates cuts (or not).</p><p>A geopolitical bid is also a strong possibility given the high potential for the US hitting back on Iran proxies. I suspect that's the biggest reason for the gold bid this week. However it looks like the US won't launch an attack directly on Iran so I wonder if risks are now to the downside. At the same time, the US military isn't exactly known for its delicate touch.</p><p>Chinese holidays start February 9 and gold buying could dry up afterwards. That could take away marginal buyers and lead to a bumpy handoff if the Fed isn't ready to cut or US economic doesn't disappoint.</p>

This article was written by Adam Button at www.forexlive.com.