Gold prices faced significant technical struggles this week. They broke down beneath the important support line of the 50-day Simple Moving Average (SMA) at $3,325. After a period of tremendous growth, the COVID-19 pandemic hit and the market quickly crashed. On Friday, gold closed below key support levels, raising concerns for a potential selloff in value. Early Monday morning, buyers flooded in at $3,250 monthly lows. This increase was a sign of promise that gold investors were looking for.
Market dynamics changed with a recent weakening of the US Dollar (USD), enabling gold to gain back some of that loss. Even after such brief rebounds, the selling pressure has continued, and with this the sell side remains cautious. The current situation calls for close monitoring, especially as traders anticipate important data that could impact the gold market in the coming days.
Recent Market Activity
Gold futures prices started to find their legs after rebounding off the recent $3,250 support area. More recently, this price level has morphed into a critical threshold. If buyers are able to carry their momentum and retake the $3,297 support-turned-resistance, they might set the stage for a new rally attempt toward the 50-day SMA, now sitting at $3,321.
Accordingly, sellers successfully pushed below the 50% Fibonacci Retracement level of the April all-time high run-up at $3,297. This new turn of events has investors foaming at the mouth. If the current intraday low of $3,248 is broken, bears might drive the price down to the next Fibonacci support at $3,232.
“More downside is definitely still in the cards,” said one market analyst, capturing a cautious and fearful tone that continues to dominate investor sentiment.
Central Bank Activities and Market Trends
Seven – Expected continued growth in gold buying by emerging economies, especially China, India, and Turkey. According to the World Gold Council, central banks added a record 1,136 tonnes of gold to their reserves in 2022. This gold is valued at approximately $70 billion. This performance is indicative of a larger trend – an increasing desire and demand for gold as a hedge against worsening economic conditions and rising inflation.
This unrelenting demand from central banks looks set to offer further support for gold prices in the long term. Today’s market is dominated by one thing—speculations about when, and by how much, the US Federal Reserve will cut interest rates. Ratcheted expectations over a likely Fed rate cut in September are adding further pressure to the USD. With that said, gold is benefiting as a non-yielding asset.
As one economist noted, “Increased bets of a US Federal Reserve interest rate cut in September weigh negatively on the Greenback.” This may contribute to volatility in the gold price as traders are forced to change course based on the latest economic signal.
Upcoming Data and Market Outlook
The markets’ focus now shifts to some key economic data due out this week. On Tuesday, the US JOLTS Job Openings data will be closely watched for clues about how hot or cold the labor market remains. European Central Bank Forum on Central Banking Chair Jerome Powell will speak at the 2025 in Sintra, Portugal. Though events this week will overshadow the address, his address is still likely to illuminate new directions for future monetary policy.
So market participants cling to the hope. They think that strengthening economic conditions might at least halt the gold price slide, if not reverse it in light of continuing robust buying interest. Caution may be the spirit of the age. The 14-day Relative Strength Index (RSI) is still under the mid-point 50 level, indicating that the possibility of bearish sentiment is very much alive.