- The gold price is still in a strong decline, in the face of the strength of the US dollar, with investor sentiment shifting away from the yellow metal in light of hopes to avoid an economic recession.
- The gold price declined toward the support level at $1896 an ounce, near its lowest level in 5 months.
- According to performance, the price of the metal declined by about $40 an ounce in one week. Before that, I may have approached $2,000 an ounce last month.
Overall, the prospect of US interest rates rising again in September, combined with more attractiveness for riskier investment strategies, means that gold's appeal as a safe haven asset has diminished. Fragile investor confidence has enabled gold to remain above the $1,900 threshold since March earlier this year, but economic data in the United States - the world's largest economy - shows employment remains healthy and inflation is tracking down. There are now renewed expectations that a global recession can be avoided amid a hawkish response from global central banks to tame inflation - as reflected in price easing.
Commenting on the performance of the gold market. Robert Rowling, Market Analyst at Kinesis Money, said that “In this environment of rising interest rates and market confidence slowly trickling back to encourage a riskier approach among traders and investors, it is difficult to see the price of gold making any gains and instead it looks like a controlled slide back into play.” Down may continue.”
Commenting on future price movements, he said it would be "interesting" to see investor reactions if prices fell below $1,900 an ounce. For his part, Carsten Fritsch, commodities analyst at Commerzbank, noted, “Given the underlying institutional support for the asset, this relative cheapness may lead to a new wave of buying from Asian buyers in particular and slow down gold's decline. However, if there is a limited reaction, it will show that the price of gold has fallen and the price will continue to fall.
And that the price of gold is also facing another challenge from the continued selling of exchange-traded funds.
Citing data from Bloomberg, he noted that net outflows had recently been recorded on 13 consecutive days, reaching 37 tons during this period — with holdings dropping to the lowest level since April 2020.
“In other words, all inflows have reversed since then,” he added. Then — that is, during the coronavirus pandemic and after the Ukraine war broke out — again, in the meantime. For the outflows to stop, the market's remaining expectations of interest rate hikes must disappear and give way to rate-cut expectations. We expect this to happen in the fourth quarter,” he added.
Gold Technical Outlook
According to the performance on the daily chart below, the gold price is still on its downward path, and breaking the psychological support at $1900 an ounce supports bears' control over the trend. It warns of an upcoming strong downward move if the US dollar continues to strengthen, and the nearest price support levels are currently 1885 and 1870 dollars, respectively, which are sufficient to push all technical indicators towards strong oversold levels.
I still prefer to buy gold from every downward level. On the other hand, over the same time period, the movement of the gold price towards the resistance levels of 1930 and 1945 dollars, respectively, will be important to break the current bearish outlook.
Ready to trade our Gold forecast? We’ve shortlisted the most trusted Gold brokers in the industry for you.