GOLD Analysis
Afternoon: Gold Price Extends Overnight Resistance Amid Fed's Outlook, will it fall back below 2300?
Highlights:
- Gold prices decline due to Fed's fewer projected rate cuts and a stronger US dollar.
- Geopolitical tensions and European political uncertainty provide some support for gold.
- Upcoming US economic data and BoJ policy decision may offer short-term trading opportunities.
Introduction:
Gold prices have extended their overnight decline, following a rejection slide from the 50-day Simple Moving Average (SMA) resistance, influenced by the Federal Reserve's recent decision to project fewer rate cuts this year. The Fed's revised outlook has contributed to rising US Treasury bond yields and strengthened the US dollar, compounding the pressure on gold prices.
Despite these factors, geopolitical tensions in the Middle East and renewed political uncertainty in Europe could help limit deeper losses in gold prices. Market participants are now looking forward to Thursday's US economic data, including the Producer Price Index (PPI) and Weekly Initial Jobless Claims, which could provide short-term trading opportunities.
Key Influences on Gold Prices
- Fed's Rate Projections: The Federal Reserve's decision to maintain interest rates and project the benchmark rate falling to 5.1% this year, indicating only one rate cut in 2024, overshadowed softer US consumer inflation figures and added bearish pressure on gold.
- Geopolitical and Political Factors: French President Macron's call for snap elections and ongoing Middle East tensions may bolster gold's appeal as a safe-haven asset, potentially mitigating further declines.
Upcoming Economic Data
Investors are also anticipating Thursday's US economic docket, featuring key indicators like the PPI and Weekly Initial Jobless Claims, which could influence short-term trading strategies. Additionally, the Bank of Japan's (BoJ) policy decision on Friday is another event that could impact the gold market.
Gold Price Technical Analysis
- Resistance and Support Levels: Gold's failure to hold near the 50-day SMA resistance supports a bearish outlook. Technical indicators suggest further depreciation, with potential support near the $2,300 mark and a more substantial level around the $2,285 horizontal zone.
- Oscillators and Potential Declines: Daily chart oscillators are in negative territory, pointing to the likelihood of continued decline. Follow-through selling could trigger more bearish moves, pushing prices towards relevant support levels.
- Upside Potential: On the upside, any strength beyond the $2,325 hurdle might attract fresh sellers, with gains likely capped near the 50-day SMA. A decisive break above this level could see gold prices retesting last week’s swing high and potentially reclaiming the $2,400 mark.
Summary
Gold prices continue to face downward pressure amid a stronger US dollar and the Federal Reserve's hawkish outlook. However, geopolitical tensions and political uncertainties may offer some support to the precious metal. Investors should closely monitor upcoming US economic data for short-term trading opportunities, while also keeping an eye on technical resistance and support levels to inform their strategies.
Support and Resistance Levels:
