Daily Price Outlook
Gold (XAU/USD) failed to stop its downward trend and remains under selling pressure around the $2,880 mark, its lowest level in over a week.
However, the decline was driven by a stronger US Dollar (USD) and a positive risk tone in global markets, dampening demand for the safe-haven metal.
It should be noted that the global market mood remains upbeat amid the US government's efforts to boost economic efficiency.
Stronger US Dollar Pressures Gold, but Rate Cut Hopes Provide Support
On the US front, the broad-based US dollar has been gaining traction amid modest uptick in US Treasury bond yields. The US Dollar Index (DXY), which tracks the USD against six major currencies, continues to gain traction, extending its gains to near 106.50.
Atlanta Fed President Raphael Bostic stated that current interest rate levels are still putting downward pressure on inflation, suggesting that the Federal Reserve is unlikely to cut rates aggressively. This keeps the US dollar strong, which in turn puts pressure on gold prices.
On the other hand, the ongoing concerns about a slowing US economy could lead the Fed to lower interest rates in the coming months, which limit gold’s downside as lower rates reduce the opportunity cost of holding gold, making it more attractive to investors and providing some support to its price.
The Fed is widely anticipated to lower interest rates in the coming months as concerns over a cooling US economy persist
Strong US Economic Outlook and Trade Policies Weigh on Gold
The global market mood remains upbeat, contributing to gold’s downward trend. Investor confidence has improved due to the US government's efforts to boost economic growth, including discussions on potential tax cuts and measures to enhance economic efficiency. This has strengthened the US dollar and reduced demand for gold as a safe-haven asset.
Further weighing on gold, U.S. officials have reinforced plans to restrict Chinese vehicle imports due to trade competition concerns.
Meanwhile, the White House has directed the Committee on Foreign Investment in the United States (CFIUS) to closely monitor Chinese investments in key sectors. These measures support the USD and risk sentiment, leaving gold vulnerable to further declines.
GOLD (XAU/USD) – Technical Analysis
Gold (XAU/USD) is currently trading at $2,896.48, down 0.03%, as it continues to struggle below the Pivot Point at $2,905.78. The yellow metal is facing selling pressure as it remains under the 50-day Exponential Moving Average (EMA) at $2,925.55, indicating a bearish bias in the short term.
The price action shows resistance at $2,924.64, with stronger barriers at $2,955.49 and $2,980.42. If gold manages to break above $2,905.78, it could trigger a short-term rally towards these resistance levels.
On the downside, immediate support is found at $2,877.24, with more substantial floors at $2,853.42 and $2,834.62. A break below $2,877.24 would reinforce the bearish outlook, likely leading to a test of the next support at $2,853.42.
Should prices continue to fall, the major support at $2,834.62 could act as a crucial level to watch for potential buyers stepping in.
The technical setup suggests a bearish trend as long as gold remains below the 50 EMA at $2,925.55. The 4-hour chart reveals lower highs and lower lows, reinforcing the downward momentum.
The Pivot Point at $2,905.78 is a critical level; a break above this could invalidate the bearish scenario, leading to a potential reversal towards $2,924.64. Conversely, a break below $2,877.24 would solidify the bearish trend, aiming for $2,853.42.
For traders, the strategy remains to Sell Below $2,905 with a Take Profit at $2,877 and a Stop Loss at $2,924. Gold's short-term outlook remains bearish, but traders should be cautious around key levels for any breakout or reversal signals.
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