Gold Starts Busy Week on Front Foot, but Short-Term Risks Lurk for Bulls
Gold and silver kicked off the new week on the front foot, with the former rising above $2030 and the latter reaching $23.00 by early European trade.
The yellow metal will be looking to avoid a hat trick of weekly losses after starting the year on a negative note.
Looking at the longer-term trend, however, there’s no doubt that gold is in a long-term bullish trend. The precious metal had ended 2023 on the back of three months of gains in Q4, climbing, albeit briefly, to a new all-time high in December.
Still, it remains to be seen whether the short-term drift will align with that longer-term trend any time soon.
This week’s key US data and central bank meetings certainly have the potential to move the metal decisively – potentially and more likely to the downside.
Along with the recent trend, gold prices fell modestly last week, although still held above key support in the $2000 area. The precious metal has struggled so far this year, because of three main factors.
Firstly, it has fallen behind thanks largely to a positive risk tone across financial markets, with the major US indexes hitting fresh all-time highs.
Investors have been piling into the racier technology sector in favor of haven assets like gold or yen.
Secondly, the US dollar has also been on the rise with the Dollar Index climbing in three out of the four weeks of the year so far, putting pressure on some dollar-denominated assets like gold and silver.
The only week the DXY didn’t rise was when it finished flat. Last week’s gains for the greenback were modest, as the DXY held below the 200-day average and key resistance around 103.50.
The slowing trend of the US dollar rally is perhaps why the precious metal has started this week on the front foot.
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