Article by: ETO Markets
Gold prices are currently facing downward pressure, extending losses observed over the last few sessions and trading near $3236.44. This pullback follows a strong run-up earlier in the year which saw the metal hit significant highs. The immediate bearish sentiment is primarily fuelled by renewed optimism surrounding potential easing in US-China trade tensions, which tends to lessen demand for safe-haven assets like gold. Furthermore, a modest strengthening of the US Dollar has added to the headwinds, making the dollar-denominated commodity more expensive for holders of other currencies. However, underpinning the market and providing support are persistent expectations for Federal Reserve rate cuts later in the year, potentially bolstered by recent signs of slowing US economic momentum. Continued geopolitical uncertainties and the structural support from ongoing central bank gold purchases also limit the potential for a deeper correction. Market sentiment appears cautious in the short term, heavily focused on upcoming US economic data, particularly the Nonfarm Payrolls report, for cues on the Fed's policy path.
From a technical standpoint, Gold (XAU/USD) displays a bearish bias following its recent decline from the April high of $…. The price has decisively breached the prior support zone identified between $… and $…, an area marked by recent lows, which is now expected to act as initial resistance on any recovery attempt. Above this, the next hurdle lies near the $…-$…region, reinforced by the 10-day Simple Moving Average ($…) and the high of April 30 ($…). Immediate support rests near the recent low of $…, tested during the latest session. Just above this sits a critical pivot zone formed by the 20-day Simple Moving Average at $… and the 21-day Exponential Moving Average around $…. A sustained break below the $… low could open the way towards the 50% Fibonacci retracement level of the recent significant upswing, calculated around $…. Further downside pressure might target the 61.8% Fibonacci level near $….
