Gold is licking its wounds around $2,025 as geopolitical tensions in the Middle East escalate further and bets that the US Federal Reserve will make aggressive interest rate cuts this year decrease. Meanwhile, according to Heraeus’ latest metal report, US investors’ appetite for gold may recover.
Investors’ appetite for gold is weak, but this may change!
According to Heraeus’ latest precious metals report, investor appetite for gold in the US remains weak. However, it is possible that it will reverse later this year. Analysts include the following assessment in the report in question:
Globally, investors in gold ETFs reduced their holdings by 8.2 moz last year, particularly from June onwards. The positive sentiment towards gold investment in the US appears to have diminished as attractive money market returns came into focus again following the mini-banking crisis in May. This was followed by five consecutive months of negative funds flows throughout the summer and fall.
The shiny metal will likely find support when the Fed cuts interest rates
Analysts say investor sentiment will turn positive towards the end of 2023 as markets become more confident that interest rates are peaking and cuts are on the horizon, pushing the gold price above $2,000 and to all-time highs. However, they state that this is not reflected in the streaming data. In this context, analysts make the following statement:
Gold ETFs have shed 897 trump holdings so far in January, continuing the trend in late 2023. Overall investor sentiment appears to be at odds with record prices, considering January ETF outflows, declining physical bullion sales from the U.S. Mint, and relatively low open interest in futures markets. Last week’s higher-than-expected inflation rate in the US once again reduced expectations for an interest rate cut in March. When the Fed cuts interest rates, gold may find support and investors’ attitudes may change.
But the situation is different outside the United States and Europe. Heraeus states that China’s gold demand indicators are strong.
Gold price technical analysis: More pain is on the cards!
Market analyst Dhwani Mehta analyzes the technical picture of gold as follows. As you can see on the daily chart, the gold price exhibited a symmetrical triangle fakeout on Tuesday. In fact, it confirmed a downside breakout from the triangle after closing the day below the ascending trend line support at $2,031. Gold sellers stepped in after the 21-day Simple Moving Average (SMA) failed to hold at $2,046.
The yellow metal is challenging the critical 50-day SMA support at $2,021 as of this writing. If this support cannot be maintained continuously, it is possible to fuel a new sales wave towards the $ 2,000 level. Before that, the $2,010 round level is likely to provide temporary support to gold buyers. Meanwhile, the 14-day Relative Strength Index (RSI) indicator has fallen further below the midline. That’s why the shiny metal has entered a downward trend.
Any recovery in gold price will be recognized above the triangle support, which has now turned into resistance at $2,033. The next strong upside barrier stands at $2,046. This level is located at the junction of the 21-day SMA and the triangle resistance. New buying opportunities will arise here. It will also allow gold to retest the psychological level of $2,050.
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