Gold Prices Break Trendline: Is a Bearish Sell-Off Coming?
Gold prices rebounded on Wednesday after hitting a one-week low in the previous session.
The renewed demand for the safe-haven metal is largely driven by growing uncertainties surrounding
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, a strategic move to boost U.S. production of a metal essential for electric vehicles, military equipment, and consumer goods. This move has sparked concerns about escalating global trade tensions, increasing the demand for gold as a safe-haven asset.
According to Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA, “Trump’s tariff concerns are causing a lacklustre state of confidence in the U.S. economy, which is supporting gold prices.” The unease is further compounded by a sharp drop in U.S. consumer confidence, which fell at its fastest rate in three and a half years in February. Simultaneously, inflation expectations surged, reflecting growing anxiety over the potential economic fallout of Trump’s policies.
Inflation and Fed Policy Impact on Gold Prices
High inflation remains a double-edged sword for gold prices. On one hand, inflation typically boosts demand for gold as a hedge against rising prices. On the other hand, persistent inflation may compel the Federal Reserve to maintain higher interest rates, which diminishes the appeal of non-yielding gold. Richmond Federal Reserve President Tom Barkin recently noted, “It’s hard to make significant monetary policy changes amid such uncertainty.”
Traders are closely watching the upcoming U.S. Personal Consumption Expenditures (PCE) report, the Federal Reserve’s preferred inflation gauge. Scheduled for release on Friday, this report could offer critical insights into the central bank’s rate-easing strategy and overall monetary policy. Tim Waterer, Chief Market Analyst at KCM Trade, cautioned, “If the numbers confirm the underlying fear that inflation is ticking higher again, Fed rate-cutting expectations could be further reined in.”
Technical Outlook: Bearish Trendline Break and Resistance Retest
Gold’s technical outlook suggests a bearish shift in momentum. The price recently broke below a key ascending trendline, indicating a potential downtrend. Currently, gold is retesting the $2,922 level, which was previously a triple bottom support but has now flipped to resistance. This level is crucial, as sellers are actively defending it, preventing a bullish reversal.
Adding to the bearish sentiment is the appearance of a Doji candlestick formation just below this resistance level. A Doji often signals market indecision and can precede a trend reversal. If bearish momentum gains traction, a sell-off could accelerate towards the next support levels at $2,895 and $2,877. Traders are advised to monitor volume spikes for confirmation, as these could indicate increased selling pressure.
Key Technical Levels to Watch:
Resistance Levels: $2,922 (former support turned resistance), $2,954 (next major resistance)
Support Levels: $2,895, $2,877 (potential sell-off targets)
Candlestick Pattern: Doji formation below resistance, signaling potential reversal
Trendline Break: Confirmed bearish breakout from ascending trendline
Gold Outlook: Cautiously Bearish
Given the technical indicators and prevailing economic uncertainties, the outlook for gold prices remains cautiously bearish. A confirmed break below the $2,922 resistance level, coupled with increasing selling volume, could signal a continuation of the downtrend. Conversely, a sustained move above this level would invalidate the bearish setup, potentially triggering a short-term rally.
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