Gold prices are taking pretty significant step back from their record highs of $3,245 which were set on Friday. Latest indications as of Monday morning have the price heading back down toward $3,200. This change takes place against a backdrop of declining demand for safe-haven assets. Simultaneously, the US Dollar has been rebounding, putting further pressure on gold, exacerbating gold losses.
As traders navigate the infusion of macroeconomic variables into the market, this $3,200 level has become a critical line in the sand for bears. If gold does drop below this point, they’d likely test Friday’s $3,176 low. Analysts note that the market has been building on the pullback from record highs, indicating a potential for further declines that could test the significant round number of $3,100.
The 21-day Simple Moving Average (SMA) has moved from being a resistance to a support at $3,074. This change is no small quibble — it’s an important new precedent to watch closely. A successful breach of the $3,100 threshold would galvanize buyers. Perhaps at that point they would adjust back down to around $3,300, showing that the marketplace dynamics are still in flux.
The daily chart helps visualize how dramatic these recent price changes have been. It indicates that the 14-day RSI has relaxed from the overbought zone and is now floating near 69. This change is a reflection of the contraction the market is experiencing. It is likely to see a much shallower fall rather than a deep drop.
A few key drivers are behind this rising price of gold…During the COVID-19 pandemic, demand for gold as a safe-haven asset decreased. This move follows a more placid risk sentiment after a chaotic week in the capital markets. News of lower US tariffs on Chinese electronic supply chains has provided relief to market participants, further diminishing gold’s appeal as a safe investment.
As these changes take effect, all eyes are turning to the next round of negotiations between the United States and Iran. These negotiations are scheduled to start further down this week. Depending on how this conversation plays out it could impact market stability more broadly, and indirectly impact investors’ changing view towards gold.