As we observe the recent trend in gold prices, there’s a noteworthy shift towards a bearish outlook, particularly evident in a 45-minute chart. This shift can largely be attributed to the market breaching a critical psychological level at 1974.8. A significant move beneath this level implies strong bearish momentum, with potential to drive prices further down. The current price also sits below both the 200 and 50-day moving averages, further solidifying this downward bias.
In the short term, we must question whether gold will retest the 1944 level or if the bearish momentum will pause, reversing to find resistance at the 1970 range, another crucial psychological barrier. Considering the high volatility expected in the coming days, two potential scenarios may emerge for gold prices. The first is a test of the 25% Fibonacci retracement level at the 1954 range, followed by a higher pull up retesting the 1960 level. Alternatively, prices could continue their descent after piercing through the 1954 range, heading down to find support at the 1947 level. With the Relative Strength Index (RSI) indicating an overbought scenario, there might be a slight pullback from current levels. Indeed, the market has robust support near the 1954 region, a level that has been tested twice already. Hence, we may conclude that gold’s long-term trend has started to lean bearish following its peak in May.
Looking at the global economic landscape, gold prices are under pressure due to a stronger dollar, as investors are closely monitoring U.S. debt ceiling negotiations. Other key events, including this week’s Federal Reserve policy minutes and economic data releases, are also being eyed. The unresolved debt-ceiling deal, coupled with bullish comments from Federal Reserve officials, has lent momentum to the dollar and weighed on gold prices. However, certain mitigating factors could offset these pressures. Fed Chair Jerome Powell’s recent signals suggesting a pause on rate hikes could ease some of the risk for gold. Investors should also monitor upcoming Purchasing Managers Index (PMI) surveys from Europe, Britain, and the United States, as well as the minutes from the Federal Open Market Committee’s early May meeting. The interplay of these factors will ultimately steer gold’s course in the coming weeks.