Gold prices tumbled hard this week. This was a big deal because they had been holding above an important level of support, spooking investors all the more. The price of gold on Tuesday closed below the 50-day Simple Moving Average (SMA) of $3,322 and closed well below it. This downward movement has sparked fears of further losses as gold struggles to maintain its value amid ongoing geopolitical tensions and monetary policy uncertainties.
Early Wednesday morning, gold was fighting to hold above $3,300. Market sentiment is heavily bearish as prices continue to nurse losses during Asian trading hours. Analysts warn that gold must first overcome several technical fences. Overcoming these hurdles will be key for it to gain momentum again in the near term.
Technical Breakdown of Gold Prices
More recently price action has clearly indicated a bearish pattern for gold. This trend is further exacerbated by the daily Relative Strength Index (RSI), which is currently below the midline. The RSI now sits around 44.50 indicating a lack of upward momentum in the strength of the market. Gold’s struggle becomes clear as it gets rejected from staying above the 38.2% Fibonacci Retracement level from the all-time rally in April. That important level today is at $3,297.
A prolonged drop underneath this Fibonacci support may sharpen the bearish move further down to the monthly low of $3,248. On the flip side, if gold succeeds in breaking above the 21-day SMA at $3,346, it could indicate the start of a recovery effort. Nonetheless, the short-term resistance is at the $3,400 barrier, which might be difficult for bulls’ traders to overcome.
“The lingering threat to inflation from tariffs will probably persuade the Fed to hold off cutting interest rates until next year, and this will put a lid on Gold prices,” – Hamad Hussain, climate and commodities economist at Capital Economics.
Market Influences and Economic Indicators
Recent geopolitical developments between the west & Russia have contributed to added uncertainty, in turn fuelling gold prices. U.S. copper import tariff US President Biden announced a 50% tariff on imported copper takes effect in 30 months. This shift has raised alarm bells over inflationary conditions that would permeate the economy and impact all sectors— including precious metals.
Financial markets are particularly sensitive to the trade standstill. The implications of this scenario for the United States and its closest allies—Japan and South Korea—are enormous. These tensions create a cautious environment as investors consider the downside risks and upside promise from upcoming US-China trade talks.
Apart from geopolitical consideration, this situation is driven by economic indicators, impacting the overall market mood. At the same time, China’s annual CPI was up by just 1 percent in June. This follows a small dip of (-0.1%) in May. The inflationary surprise further muddies the waters for monetary authorities. They will need to be dexterous in their approach to monetary policy as starting economic conditions continue to shift.
Right now, markets see a 61% probability that the Fed cuts interest rates in September. Gold traders are keenly awaiting to see how this alteration will impact gold’s attractiveness as a haven. Renewed optimism among markets regarding the prospects for U.S. trade deals is helping lift the U.S. Dollar (USD). This legislative development furthers the uncertainty outlook for gold.
Prospects for Gold Investors
Today, investors in gold are treading a minefield. On Tuesday, Doge fell by more than 1%. This sharp drop has many quickly reevaluating their plans as they look for more definitive signals from the Fed and the trade war raging with China. With gold prices still hovering around the $3,300 mark, participants in this growing market find themselves filled with uncertainty surrounding future gold performance.
The final line of defense for gold buyers is found at the 50% Fibonacci support barrier at $3,232. If this level holds firm, it could be used as a strong foundation for future bullish bounces. Conversely, if it drops below this level, we may experience deeper drop-offs.
While analysts dive deep trying to understand what market trends and economic data means for them, investors must continue to be on guard. That combination of tariffs, interest rates, and inflation should play the major role in determining gold’s direction over the short term.