Last week, New York gold futures plunged from a high of over $2800 two weeks ago to just over $2500, marking a nearly 5% drop within a single week, the largest weekly decline in nearly three years. Since the beginning of the month, gold prices have fallen over $250, a drop of about 9%. Although medium- and long-term support factors for gold remain, concerns in the market about further declines in gold prices are rising.
Technical Signals Indicate Short-Term Pressure
Technical analysis shows significant bearish signals for gold prices on the weekly chart. As prices exit the overbought zone, the RSI (Relative Strength Index) has dropped sharply from above 80. Historical experience suggests that such reversals from extreme levels usually herald a shift in momentum. For example, similar situations in 2009 and 2011 both led to significant declines in gold prices.
Analysts point out that the current 50-week moving average is positioned at $2330 and is trending upwards, with an expected rise to $2400 by year-end. If gold prices fall below this critical support level, it could trigger a deeper correction. However, analysts believe this adjustment is more of a short-term correction, with long-term bullish support still possible.
Dollar and Federal Reserve Policy Pressure Gold
The recent decline in gold prices is mainly due to a strong dollar and changes in Federal Reserve policy expectations. The latest economic data show that the Fed has no intention of changing monetary policy in the short term, which has weakened market expectations for rate cuts, further pressuring gold prices. Nevertheless, market analysts note that the current strong performance of the dollar might retreat in the future, providing an opportunity for gold prices to rebound.
Safe-Haven Demand and Inflation May Support Gold Prices
Although gold faces short-term pressure, analysts believe global economic and geopolitical uncertainties could still spur gold's attractiveness as a safe-haven asset. For instance, an escalation in trade disputes or international tensions could prompt investors to return to the gold market. Additionally, inflation is a potential positive for gold. If persistent inflation levels outpace interest rate increases, the Fed may need to adjust its policies, thereby benefiting gold.
Policy and Market Signals Are Key
In the coming months, statements from Federal Reserve officials and changes in monetary policy will be critical factors affecting gold prices. The upcoming speeches by Fed officials, including Chairman Powell, may provide important guidance for the market. Additionally, any retreat in the dollar's strong performance and changes in inflation data could offer potential upward momentum for gold prices.
Overall, although gold currently faces short-term adjustment pressures, its long-term value as a safe-haven asset remains of interest to the market. Supported by global uncertainties and inflation potential, gold investors might find opportunities to position themselves around $2400.
