Although gold prices are close to their peak levels, a cautious stance prevails in the market. Gold prices are likely to continue their recent pullback as the technical and fundamental picture worsens, according to Arslan Butt, Chief Commodity and Indices Analyst at FX Leaders.
What’s behind the decline?
cryptokoin.comAs you follow from , gold started the week with a decline. It hit its lowest level in the last week at $2,150 in the Asian session on Monday. Thus, the precious metal experienced its third consecutive day of decline. Arslan Butt therefore says that the near-term price forecast for spot gold looks weak. In this context, the analyst makes the following statement:
This decline is attributed to last week’s strong inflation numbers from the United States, which raised expectations that the Federal Reserve would maintain long-term high interest rates. As a result, this scenario supported US Treasury yields, provided support to the US Dollar (USD) and put pressure on non-yielding gold.
Important factors for gold: Fed expectations and geopolitical tensions
Arslan Butt says that, despite this, the market expects an interest rate cut from the Fed as early as June. This expectation, combined with ongoing geopolitical tensions, will provide a floor to gold’s value, according to the analyst. Thus, it will prevent further significant losses. However, Butt also makes the following warning:
Investors will likely remain on the sidelines waiting for additional indications of the Fed’s interest rate trajectory that they hope to get from Wednesday’s FOMC meeting.
US inflation, goldof on price dynamics effective
Butt says US inflation data has a big impact on gold price dynamics. He points out that this “will probably negatively affect the attractiveness of gold.” In this regard, the analyst makes the following assessment:
Reports from the University of Michigan’s preliminary survey showed little change in both one-year and five-year inflation expectations in March, while the U.S. Consumer Sentiment Index fell to 76.5. CME Group’s FedWatch Tool is reducing the USD’s bullish sentiment, suggesting there is a 60% chance of a rate cut at the June policy meeting.
These developments strengthen the gold market!
The analyst expects ongoing geopolitical tensions, “particularly the Russia-Ukraine conflict and unrest in the Middle East,” to also support the value of gold as a safe haven. Butt expresses his views on this issue as follows:
Ukraine’s intensification of drone attacks on Russian oil facilities and Israeli Prime Minister Benjamin Netanyahu’s confirmation of his plans to advance into Gaza’s Rafah region are among the recently escalating tensions. These developments contribute to the environment of uncertainty and strengthen the gold market.
Gold technical view: A bearish view prevails!
The analyst also looks at the technical picture of gold. Arslan Butt notes that a descending triangle breakout formation has formed on the 4-hour chart. In this context, he draws attention to the following levels:
Gold price is down 0.36% to $2147.07 and remains below the $2157.22 pivot point. The asset’s violation of the descending triangle formation near the $2,157 level emphasizes that this move is bearish. Immediate resistance lies at $2,173.06, with other hurdles at $2,189.33 and $2,204.58. Conversely, support levels are set at $2,139.00, $2,124.63, and $2,109.75, which could act as potential recovery zones.
Butt says a number of technical indicators support the bearish view, including the Relative Strength Index (RSI) at 36 and the 50-day Exponential Moving Average (EMA) at $2,150.84. Arslan Butt explains this situation in the technical drawing as follows:
A breach of the descending triangle formation signals imminent selling pressure that will potentially drive the price towards the $2,139.00 support level. Generally, gold remains bearish below $2,150, and any upside movement beyond this threshold signals a shift towards bullish momentum.
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