Gold Sells Off After Hitting All-Time High: Can Bulls Mount New Charge Higher?
Gold rallied on the final trading day of last week, eventually reaching a new record high of $2,148 as the new week commenced. Following this peak, Gold experienced a swift retracement, currently undergoing a retest towards the $2,020 — $2,050 zone, recognized as resistance since 2020.
This zone has consistently proven resilient, with unsuccessful attempts to breach it in August 2020, March 2022, and most recently in May 2023. Recent developments that propelled gold above this resistance zone include:
Despite these factors, it is important to note that the likelihood of Powell's rhetoric alone driving gold upward appears weak, especially considering that inflation targets have not been met, and existing risks may still exert pressure.
Regarding the Fed's interest rate policy, expectations are forming for earlier rate cuts. However, the current geopolitical risk environment, with the potential for oil prices to create inflationary pressure, makes it less logical for the Fed to adopt a dovish tone. Therefore, a more moderate rise in gold, considering geopolitical risks, is plausible in a high-yield environment.
The cooling in the US economy is also a crucial factor influencing interest rate decisions. Last week's data indicated a slowdown in the US economy, accompanied by easing inflationary pressures. The upcoming release of key data, notably the nonfarm payrolls data on Friday, will provide further insights into the market's interest rate outlook.
In summary, the interplay of geopolitical risks, external factors, and US economic data will likely shape the trajectory of gold in the upcoming periods.
The gold price is undergoing testing within the range of $2,020 — $2,030, which has transformed into a support zone during
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