Gold (XAU/USD) succumbed to another bout of selling pressure after a brief recovery. During the Asian session, it even touched just over $4,110 on Thursday prior to the crash. This drop indicates a retreat from yesterday’s weekly peak. Traders are watching for key economic indicators that could change the prevailing market dynamics. The US dollar is riding high, reaching its strongest level since late May. This increase is driven by the Federal Reserve’s hawkish surprise.
The recent action in gold equities prices further demonstrates the current shaky state between gold support and resistance levels. While gold has hit a zenith of $4,110, its trajectory is headed south. Some analysts are cautioning that should it fall under the all-important $4,000 threshold, it can quickly fall to the next support level at $3,931. Traders need to be wary as they consider positioning ahead of what could be an extension of this week’s rally. This is particularly acute with the market having just recently fallen below $4,000.
Gold is currently heavily supported by the 200-period Exponential Moving Average (EMA), which is located just above the $4,018 level. A sustained move below this level may prompt a deeper downward trajectory, potentially retesting the late October swing low near $3,886. Conversely, should gold exhibit follow-through buying beyond the overnight swing high of around $4,120, it could act as a catalyst for bullish traders. If it can swing up and convincingly retake the $4,120 level, that might prepare the battleground for a bigger challenge to come. The next big hurdle is in the $4,152 – $4,155 range.
The dollar’s recent strength is one of the key players in gold’s price movements. The dollar’s ascent is attributed to rising expectations surrounding the Federal Reserve’s monetary policy, which has become decidedly less dovish. As the US dollar strengthens, gold—historically seen as a protection against currency depreciation—comes under bearish influence.
On top of this, geopolitical events have been a driving force behind market volatility as well. A bipartisan US delegation’s rare wartime visit to Kyiv, during which they discussed US assistance priorities with Ukrainian leadership. This high-level meeting came on the heels of US President Donald Trump reportedly approving a 28-point plan to advance peace between Russia and Ukraine. Such significant geopolitical events can sway market sentiment and influence gold prices as investors react to potential shifts in global stability.