Gold prices are recovering again, showing this market’s propensity for volatility. Plus, they have really done so on a daily closing basis by reclaiming the all-important 21-day Simple Moving Average (SMA). The new baseline is $3,292, which speaks to a somewhat queasy feeling in today’s market. As of early Friday, gold prices had retreated again. This drop forced them to surrender some increases from past recoveries, which had raised prices from weekly bottoms around $3,245. Investors are understandably looking ahead to the US Personal Consumption Expenditure (PCE) inflation data. This report will undoubtedly go a long way in influencing emerging market trends.
The fate of gold prices hinges on the impending release of the US core PCE Price Index and ongoing tariff discussions. According to experts, as long as the 21-day SMA stays firm at $3,292, this would leave room for a bounce-back. This bounce could be headed to test old highs. A bullish breakout above these levels might cause gold prices to test the technical target of the $3,350 psychological level. A daily close beneath the 21-day SMA might reawaken bears and shift focus back to several key support levels. In particular, market participants will likely focus on the 61.8% Fibonacci retracement at $3,168.
Recent Market Movements
As a result, last week, gold prices jumped to two-week highs of $3,366. This impressive comeback came after a deep touch on the 61.8% Fibonacci support at $3,168. That bullish wave continued to pick up steam as buying demand exploded in the North American trading day. This was at the same time as heavy selling pressure on the US Dollar. The USD was rocked this past week by a decision handed down by the US Court of Appeals for the Federal Circuit. This decision stayed a district court ruling on government cross appeals.
Nonetheless, gold price has pulled back sharply this week as traders sit on sidelines in advance of what might be major economic reports. Thursday’s worse-than-expected Jobless Claims and Pending Home Sales fanned the USD’s already steep decline. This, in turn, pushed up the price of gold. The market is still sensitive to two-way risks as it re-evaluates itself going into the US inflation print.
“You can assume even if we lose tariff cases we’ll do it another way.” – White House Advisor Peter Navarro
Technical Indicators
The technical picture for gold is flashing a little all over the place. The 14-day Relative Strength Index (RSI) has stormed back above the midline as well. It’s up about 52.28, showing that bulls are beginning to return in short order. That said, caution is absolutely necessary at this time. If the daily candlestick closes under the 21-day SMA, we could go back to targeting the 50% Fibonacci around $3,230.
The 50-day SMA is close to this level as well, which would add caution for traders. If gold can’t maintain a price level above the 21-day SMA, that would be bad news. A bearish flip at the midline, alongside a weekly close below this highly confluence support zone, can unleash additional selling pressure. This environment could accelerate the downward price discovery to those lower supports.
Implications of Tariff Decisions
Recent developments on the tariff front have been another factor influencing market sentiment towards gold prices. The US Court of International Trade (UCIT) blocked former President Trump’s “Liberation Day” tariffs from taking effect, which has bolstered a recovery in the USD at gold’s expense. Market analysts are convinced that any upcoming tariff repeal or imposition will further shape investor attitude and market forces dramatically.
Traders are looking ahead to next week’s inflation data release. As always, gold remains in the balance, wavering on the precipice of new highs or fresh lows. The balance between accumulating economic indicators and unfolding geopolitical events will almost certainly dictate which direction it takes in the next few weeks.