Gold prices struggled to keep the bullish momentum after a more robust recovery reclaimed much of gold’s prior losses on Thursday. Gold prices fell back to $3,120 – their lowest level since April 10. This drop-off in unexpected demand created selling waves through the Asian trading session of Friday. The price is presently stalling around the 200-period SMA (Simple Moving Average) on the H4 (4-hour) timetable. What is unfolding could be a perfect storm for traders.
The recent gold price downturn can be explained largely by large external factors, in particular the temporary US-China trade truce. This truce is only intended to be for 90 days, so the potential weight on global markets has been relieved a bit. Consequently, demand for gold as a safe-haven asset has shifted considerably. Investors are getting their confidence back. This change has weighed heavily on gold prices, which are typically seen as a safe haven investment during times of economic turmoil.
On Thursday, gold prices proved a powerful bounceback from the $3,120 area. Yet, this impressive advance has faced headwinds that have hampered its ability to build momentum with bearish selling re-entering the fray. Analysts have cautioned that despite the short-lived price recovery, the long-term trajectory of this downturn suggests that at least for now, investor confidence is not back.
“Gold price stalls recovery from over one-month low near 200-period SMA on H4.” – FXStreet
The long term implications of the current US/Chinese trade war would be monumental. The truce has reversed market sentiment, making investors less likely to dive into gold’s protective arms. As investors react to these circumstances, the gold prices could become increasingly dynamic.
Even as a safe-haven bullion, the market conditions are not so friendly for gold at this time. Russian invasion, as geopolitical events continue to roil the market. As sentiment continues to improve, the short-term precious metals allure diminishes.