Gold prices were having a hard time continuing their winning streak, even with a strong rebound from late-summer lows. On Friday, in the Asian trading session, gold found sellers, a clear indication of a change in market sentiment. The price had recently recovered from the $3,120 area, which is the lowest point seen since April 10.
That strong recovery move hasn’t had much support and has just run into sandbag. Following that, gold prices climbed above the 200-period Simple Moving Average (SMA) on the four-hour chart. Traders tend to look at this widely followed technical indicator as the first major benchmark. Given its current standing, questions have arisen as to whether gold’s upward march can continue.
On one side, the recent US-China trade truce is taking some pressure off of global markets’ shoulders. This agreement—which will remain in place for 90 days—provides a reassuring backdrop for investors. Among the many positive outcomes from the P3 development is this consideration. It might put pressure on gold generally considered a safe-haven asset. Coupled with easing geopolitical tensions, investors might be less motivated to seek safety in gold.
In addition, softer-than-expected inflation data from the US has strengthened signals that the Federal Reserve may cut rates in coming months. Large changes in monetary policy inherently yield substantial effects on gold prices. Since lower interest rates tend to increase the attractiveness of non-yielding assets, like bullion, this is a natural hedge.
Though traders try to read these sometimes conflicting dynamics, the sentiment is still skittish. The gold market’s ability to capitalize on the previous day’s gains appears limited. This constant battle to have the last word illustrates the powerful forces at work in the markets, pushing and pulling gold’s price action in either direction.
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