Gold prices were nearing that all-important $3,300 tipping point early Tuesday morning, prompting speculation about the next big maneuver in the market. Market watchers note that sellers could do battle at the psychological $3,350 figure if a bounce picks up steam. So for the bears, the key thing to look out for would be a daily candlestick closing below the strong support at $3,297. If accomplished, it would face the 50-day Simple Moving Average (SMA) at $3,262.
So Gold’s performance will be fundamentally linked to the story waiting to unfold on US-China trade negotiations. The market is closely monitoring these talks, which could change investor sentiment and gold’s path. The metal’s price has yo-yoed recently amid uncertainty over the talks. Meanwhile it flipped its previous bounce and tested the $3,300 mark once more.
Current Market Dynamics
As of Tuesday morning, gold buyers have the bullish sentiment. They’re probably looking for the market to remain bullish as long as the 21-day SMA and the 14-day RSI midline continue holding firm. The RSI is now resting close to the mid-point value of 51, which further reinforces a positive view for gold’s performance. If buyers are able to keep the momentum going, they will likely force the price above the 23.6% Fibonacci resistance at $3,377. According to analysts, if this level is broken the May high of $3,439 will be the next target.
On the flip side for the gold sellers, the key support at $3,297 needs to be cleared to trigger further falls into $3,262. Buyers’ last line of defense The support line for buyers now lies at $3,232, which is the 50% Fibonacci retracement of the last bull run’s uptrend. Market participants and regulators alike are watching these levels like hawks as they predict the future of the market.
“China is not easy but we are doing well with China.” – US President Donald Trump
Central banks, especially those in developing economies, have a huge hand in controlling the price of gold. Official records indicate that these institutions injected approximately 1,136 tonnes of gold into their reserves last year. That makes this hidden gold worth around $70 billion. Most interestingly, central banks from emerging economies, especially China, India and Turkey are intensifying their gold precept at a staggering pace. This recent trend makes it clear that gold is still an important reserve asset. Consequently, we should see its price keep climbing in future months as well.
Technical Indicators and Influences
The market’s near-term bullish to bearish gold technical posture remains. It wouldn’t until the important support line of $3,297 is broken. Analysts are keen to point out that if this level sticks, it paves the way for a stronger recovery in prices. On the flip side, a withdrawal of this support could pave the way for a dramatic turn in market conditions.
Lastly, gold prices are affected by strong moves in the US Dollar. As noted in the dollar strong bids section above, early Tuesday was dominated by a rebound in USD/JPY alongside rising trade optimism. The relationship between the dollar’s strength and gold prices usually causes tumultuous market fluctuations.
Markets await Wednesday’s US Consumer Price Index (CPI) data. This data can provide fresh perspectives for both USD and gold prices. Going forward, smart investors will assess progress on inflation, trends in central bank policy and communicate their expectations clearly.
“We will raise interest rates if we have enough confidence that underlying inflation nears 2% or moves around 2%.” – Bank of Japan (BoJ) Governor Kazuo Ueda
Future Outlook for Gold Prices
Looking forward, gold buyers anticipate strong offers at the intersection of the 21-day SMA and the 38.2% Fibonacci retracement level from April’s record rally. This confluence would act as an important area of interest for traders looking to profit on the upward advance.
Should bullish momentum continue, analysts predict that gold could challenge higher resistance levels, particularly if geopolitical factors favor safe-haven assets like gold. If economic data releases indicate a pickup in inflation or increased dollar strength, then gold could be pressured lower.