Is the Retreat in Gold Coming to An End?

Gold made a new record high on Wednesday last week, but it made a reversal and has been falling for four straight days. Yesterday the price fell below $2,400 where it closed the day, which opens the door for further declines toward  June’s lows, below $2,300, however the 50 daily SMA might stop the decline.

The first half of July saw a challenging period for the US dollar as investors anticipated the Federal Reserve might start reducing rates in September. This expectation led to a decrease in US Treasury yields, causing the dollar to drop to three-month lows by midweek. Concurrently, gold surged to all-time highs, reaching a new record at $2,483.

Gold Daily Chart – Will the 50 SMA Hold as Support?

After hitting its peak, gold began to decline gradually by midweek. The retreat accelerated on Friday following an earlier surge in July, with gold prices plummeting by $50, touching a low around $2,394 and closing at $2,400. After a three-day downward trend, XAU/USD opened with a slight positive gap and rose to an intraday high of $2,411.91. However, the 20-hourly SMA rejected this price, leading to a swift fall below $2,400 again.

Selling Pressure In Gold and Technical Indicators

Short-term charts indicate significant selling pressure on gold, but the 50 SMA (yellow), which has historically acted as support and resistance, might halt the price decline. Investors are keenly awaiting more information on the Federal Reserve’s upcoming rate policy, which will significantly influence gold’s trajectory.

Economic Data and Future Projections

This week, key economic indicators like the PMI, US Q2 GDP, and PCE inflation figures are expected to offer crucial insights into the global economic outlook, potentially shaping short-term trading strategies for gold. The PCE report, the Fed’s preferred measure of inflation, is anticipated to show a dip in Core PCE from 2.6% to 2.5% YoY. Such a decrease would bolster the USD and further pressure gold prices.

Political Implications on Gold Prices

In the medium term, US political developments could also impact gold. A potential Trump victory might benefit gold due to his proposed tax cuts, deregulation, and increased budget deficits. Trump’s economic policies are considered inflationary and could have significant geopolitical implications, favoring gold in the short term. On the other hand, Harris’ international affairs strategy remains uncertain, adding another layer of complexity to gold price predictions.

Gold Live Chart