“Pressure May Increase” Analyst Shares Predictions for Gold Prices

According to analyst Haresh Menghani, gold prices extended the rejection drop of the day before the crucial 200-day SMA and witnessed some continuation of selling for the second consecutive session on Thursday. The downside trajectory has brought gold closer to monthly lows, around the $1,780 region touched earlier this week. The analyst notes that despite signs of easing inflationary pressures in the US, investors still believe the Fed will begin rolling back pandemic-era stimulus later this year, which is seen as a key factor diverting flows from the unyielding yellow metal. For the latest developments and analyzes on gold prices cryptocoin.com keep reading.

Haresh Menghani: Gold failed to capitalize on dollar weakness

Meanwhile, Analyst Haresh Menghani points out that the concerns about the rapidly spreading Delta variant and the global economic slowdown have not provided any support to gold, which is seen as a safe haven, and makes the following assessment:

The bulls even ignored a subdued US dollar price action that tends to benefit dollar-denominated commodities, including gold. With the most recent decline, the precious metal has now wiped out its weekly gains and appears vulnerable to further slides. A convincing break below the $1,780 horizontal support will reaffirm the downside and set the stage for a resumption of the recent decline from the $1,832-34 supply zone.

Gold prices are trading around $1,782.50, extending the previous day’s losses into Thursday’s European session. Haresh Menghani explains why the yellow metal failed to take advantage of the weakness of the US dollar on Wednesday, as market sentiment on the Fed’s next moves waned, despite the US Consumer Price Index (CPI) supporting stocks and putting pressure on US Treasury yields:

The reason may be linked to the September and August Import-Export Price Index data, respectively, as well as the cautious optimism shown by European Central Bank (ECB) policymakers and the strong NY Empire State Manufacturing.

“Global developments are challenging for risk appetite and gold prices”

“The market may be overestimating the risks to the global growth outlook,” said Isabel Schnabel, Member of the Executive Board, one of the ECB policy makers, and was more hawkish. As reported by Reuters, ECB Chief Economist Philip Lane was in line, saying he is happy that supportive monetary policy is helping to build core inflation in the euro area. Analyst Haresh Menghani comments:

It’s worth noting that Australia’s tripartite security agreement with the UK and the US utilizing nuclear-powered submarines signals a further deterioration in relations with China, affecting market sentiment earlier in the day. In addition, high virus infections in Australia, China and New Zealand are also challenging for risk appetite and gold prices.

Haresh Menghani states that the USA’s adding the UK to the welcome list for the diplomatic talks to be held at the White House next week and that Western friends are once again preparing for a war with China has increased the market fears and this situation has aggravated the emotions.

Amid these games, S&P 500 Futures wipes out early Asian gains, while US 10-year Treasury yields are down 1 basis point (bp) to retest 1.297%. Given the negative market mood ahead of key data, risk catalysts could keep gold prices under pressure.

Gold prices technical analysis

According to analyst Haresh Menghani, in addition to the pullback from the 17-day horizontal hurdle, the failure of gold traders to sustain the 100-SMA break also points to the weakness of the commodity, further indicated by a downward sloping RSI line. Haresh Menghani continues his analysis:

Therefore, gold sellers are trending towards the monthly support line around $1,785. However, a clear drop below the stated support line will set the tone for the southbound near mid-August lows at $1,770. Meanwhile, the horizontal area formed by the 100-SMA and multiple tops since August 24 marked around $1,804 and $1,808-09, respectively, remains the metal’s short-term bullishness. There is also a two-month area around $1,834, which is acting as a key resistance, holding gold’s key upside towards the $1,900 threshold. Overall, gold prices are holding tight between short-term horizontal resistance and an ascending support line.

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