GOLD Analysis
Afternoon: Gold Retreats Amid Risk-On Sentiment and Fed Rate Speculation
Highlights:
- Risk-On Sentiment: Optimism around a potential Israel-Hezbollah ceasefire and pro-business US policies pressured safe-haven gold demand.
- Fed Policy Impact: Hawkish Fed signals and strong US PMI data limited gold’s appeal amid expectations of slower rate cuts.
- Key Levels to Watch: Immediate support at $2,650 and resistance at $2,678, with FOMC minutes and PCE data shaping the outlook.
Overview:
Gold prices (XAU/USD) experienced a sharp decline from a three-week high of $2,721, as risk-on sentiment in global markets eroded safe-haven demand. The market mood improved following reports of a potential Israel-Hezbollah ceasefire and the nomination of Scott Bessent as the new US Treasury Secretary. These developments, coupled with expectations of limited Federal Reserve rate cuts, exerted significant downward pressure on gold, pulling it towards the mid-$2,600s.
Market Dynamics
- Geopolitical Influence
Optimism around a potential Israel-Hezbollah ceasefire eased geopolitical tensions, bolstering risk appetite and reducing demand for non-yielding safe-haven assets like gold.
- Federal Reserve Policy Expectations
Hawkish commentary from Fed officials, coupled with robust economic indicators such as the US PMI rising to 55.3 (the highest since April 2022), dampened expectations of significant rate cuts, making gold less attractive.
- US Dollar and Treasury Yields
While gold faced headwinds from a stronger economic outlook, profit-taking in the US Dollar and declining Treasury yields provided marginal support, halting further declines.
Technical Analysis
Gold prices fell below the 23.6% Fibonacci retracement level of its recent rally but managed to hold above critical support levels. Immediate support is identified at $2,650, with the next level at $2,629. Resistance levels lie at $2,678 and $2,700, with a breakout above $2,722 potentially signaling renewed bullish momentum.
The 100-period SMA near $2,660 served as a key pivot point, preventing steeper losses. If gold breaches the $2,650 support level, it could open the door for deeper corrections. Conversely, recovery above $2,678 may drive prices toward $2,700 or higher.
Outlook and Key Events
This week, FOMC minutes and PCE data are crucial for gold’s trajectory. These releases will provide insights into the Federal Reserve’s monetary policy stance, influencing market expectations for future rate cuts and gold’s demand dynamics.
Actionable Insight
Sell gold near $2,683-85, targeting $2,650 with a stop loss above $2701
Support and Resistance Levels:
