Gold prices continued their downward trend this morning after a slight uptick on Monday, marking a continuation of the decline initiated late last week. In contrast to Bitcoin's impressive jump to an all-time high of over $107K this week, gold finds itself trapped within a stagnant range. This stagnation underscores the market's increasing anticipation that the US Federal Reserve will adopt a more hawkish stance in its forthcoming meetings. As a result, the short-term outlook for gold appears to be leaning toward further declines.
Impact of US Dollar Strength and Bond Yields
The US dollar has shown renewed strength, and bond yields are rising once again, with the yield on the US 10-year Treasury climbing to 4.42% this week. The increase in yields raises the opportunity cost of holding gold, which does not generate any yield. Additionally, the recent rally in cryptocurrencies has shifted investor focus away from gold as a safeguard, while traditional value stocks also face challenges. The Dow has experienced an eighth consecutive session of losses, marking its longest stretch of declines since August 2011, while growth-focused indices like the Nasdaq 100 continue to soar into new territory. Without a surprise dovish signal from the Fed or more robust stimulus measures from China, gold could remain under pressure in the near term. Today's upcoming US retail sales data is not expected to substantially impact gold prices.
China's Economic Situation and Its Influence on Gold
Technical Gold Forecast: Key Levels to Monitor
From a technical standpoint, the outlook for gold has yet to turn fully bearish. The metal maintains its pattern of higher highs and higher lows; however, bullish momentum has weakened since reaching a peak of $2790 in late October. The failure to breach the key resistance level of $2710-$2725 last week implies that sentiment may be shifting slightly towards the downside.
Key support levels are emerging as significant indicators. The initial major support level at $2645, previously a bullish signal, has now been breached, indicating a possible weakness. Should buyers not initiate a rebound soon, gold might drop towards $2600, clearing liquidity beneath the recent low of $2613. This $2600 level coincides with a bullish trend line established since summer, and if it fails to hold, the market may focus on the $2580 mark to prevent a more significant decline toward $2500.
On the upside, the $2710-$2725 range continues to act as a critical resistance zone, where significant selling pressure has occurred. Given the recent price movements, a more tempered recovery toward lower resistance levels appears probable before any efforts to retest this zone. Thus, the $2675 level, representing the low from last Thursday's bearish engulfing candle, becomes an important resistance level to monitor for potential near-term rebounds.
-- Analyzed by market insights.
