GOLD Analysis
Afternoon: Gold Falls Below $2,735 Amid Shift to Fixed Income and Defensive Equities
Highlights:
- Gold dipped below $2,735 as investors favoured fixed income and defensive equities.
- Fed rate cut expectations for 2025 limit the downside for gold prices.
- Technical indicators suggest key support at $2,720 and resistance at $2,760.
Overview:
Gold prices reversed lower, slipping below $2,735 as investors shifted their focus toward fixed income and defensive equities, particularly following a reassessment of the heavyweight US tech sector’s future returns. Despite the pullback, expectations of lower interest rates from the Federal Reserve (Fed) this year are cushioning losses, with markets anticipating dovish forward guidance during the upcoming Fed meeting. Non-interest-bearing assets like gold continue to benefit from the possibility of rate cuts, as softening inflation metrics bolster these expectations
Market Outlook and Analysis
Gold’s decline aligns with a broader preference for yield-generating assets amid concerns over US tech sector valuations. Recent CPI data, showing easing inflation, has fuelled hopes that the Fed will maintain a dovish stance, with markets pricing in at least two rate cuts this year. Investors anticipate the first cut as early as May, which supports the medium-term bullish outlook for gold. However, near-term pressure remains as risk sentiment favours other asset classes.
Technical Analysis
- Support and Resistance: Gold faces strong support at $2,720, with further downside opening the door to $2,700. Resistance levels stand at $2,760 and $2,800, with a sustained breakout above $2,760 indicating a bullish reversal.
- Indicators: The RSI (Relative Strength Index) is approaching oversold territory on the 4-hour chart, indicating potential stabilization near $2,720. The MACD (Moving Average Convergence Divergence) shows bearish momentum, aligning with the sell-off, while the 50-day EMA at $2,750 acts as immediate resistance.
- Trade Setup:
- Action: Sell on price jumps near $2,745.
- Target: $2,720, aligning with the first key support level.
- Stop Loss: Above $2,760 to mitigate risks from upward volatility.
Key Data to Watch
Investors will monitor the release of key economic indicators, including:
- Core Durable Goods Orders (m/m) and Durable Goods Orders (m/m): Insights into manufacturing and capital investment trends.
- CB Consumer Confidence: Market sentiment and consumer outlook.
Conclusion: Gold prices remain under pressure amid a cautious market environment. However, dovish expectations for the Fed provide a buffer, keeping the longer-term bullish outlook intact. Traders are advised to stay cautious, given technical resistance at $2,760 and evolving market sentiment.
Support and Resistance Levels:
