Gold prices held steady near a 2.5-year low on Monday as a strong US dollar and major central banks took an aggressive stance on interest rates to rein in inflation. Analysts interpret the market and share their forecasts.
“It is very difficult to create a bullish situation for gold”
Spot gold was up 0.20% at $1,646.80 at press time. However, gold lost 1% at the start of the session. In this move, it saw $1,626.41, its lowest level since April 2020. U.S. gold futures fell 0.27% to $1,651. Meanwhile, the dollar index (DXY) has hit a new high since 2002, supported by the decline in the British pound. City Index analyst Matt Simpson interprets the developments as follows:
It is very difficult to create a bullish case for gold until the Fed and especially (other) central banks also see a pivot following the Fed. However, once the recession becomes a reality, the Fed will no longer be on the rise. In this case, gold has a chance to regain its safe-haven status.
Gold technical analysis: Downside momentum still intact
Market analyst Sagar Dua analyzes the technical outlook for gold as follows. The gold price retraced most of the losses recorded in the Tokyo session. The precious metal fell sharply to $1,630.00. However, he recovered solidly. This points to the formation of a buying queue, which indicates a strong buying structure. The yellow metal is attempting to slide into the previous stable area located in the $1,640.00-1,649.06 narrow range.
On an hourly scale, gold prices are trying to hit the 20-period Exponential Moving Average (EMA) at $1,650.54. If the precious metal manages to break above the 20-EMA, it will find major roadblocks around the horizontal resistance placed at $1,654.41 from Sep 16. The Relative Strength Index (RSI) (14) oscillates in the 20.00-40.00 range. This suggests that the downside momentum is still intact.
“Bulls don’t want to see a breakout here”
cryptocoin.comAs you can follow, US inflation is at its highest levels in the last forty years. In addition, geopolitical concerns are growing with the ongoing Russia-Ukraine war. However, market analyst Chris Kimble says gold bulls are still patiently waiting for a big win. The analyst looks at the long-term monthly line chart of the gold price. On top of that, it provides a macro-technical look at the precious metal.
As you can see, the yellow metal has been trading sideways (shade blue) for the past two years. This is reminiscent of the other two periods when gold saw a trading range support breakout and remained weak for years thereafter. Hence, the recent weakness raises concerns for the bulls. Gold is also testing the long-term trend support line. This makes the price area even more important.
“The door is open for extra losses in the gold price”
Open interest on gold futures markets declined by nearly 1.6k contracts Friday after two consecutive days of pullbacks, according to preliminary data from CME Group. The volume also acted accordingly. Accordingly, it rose for the fourth consecutive session. The rise this time was around 16.6 thousand contracts.
Gold’s strong decline below the $1,650 region on Friday comes amid rising open interest and volume, market analyst Pablo Piovano says. According to the analyst, this left the door open for the downtrend to continue. But the close target remains at $1,600.
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