Spot Gold Sees Short-Term Decline Amid Market Speculations
In Asian morning trading, spot gold prices continued their short-term decline, dipping below $2330 per ounce. According to FXStreet analyst Christian Borjon Valencia, the technical trend of gold suggests further potential drops.
On Monday, gold prices rose due to a pullback in the U.S. dollar, with investors anticipating the release of U.S. Personal Consumption Expenditures (PCE) inflation data later this week, which is expected to provide insights into the Federal Reserve's monetary policy. Spot gold closed up $12.49, or 0.54%, at $2,334.13 per ounce.
David Meger, director of alternative investments and trading at High Ridge Futures Traders, noted that gold is in a consolidation phase, with active buy-low trading. The market is closely watching for trends in interest rates and potential rate cuts.
The focus this week is on the U.S. PCE data, scheduled for release on Friday, as it is the Federal Reserve's preferred inflation indicator. Additionally, talks by several Fed officials, including Governors Cook and Bowman, are highly anticipated. San Francisco Fed Chairman Richard M. Daley stated on Monday that more work is needed before considering a rate cut.
According to the CME's "Fed Watch Tool," traders currently estimate a 66% chance of a rate cut in September. Lower interest rates would reduce the opportunity cost of holding gold, potentially making it a more attractive investment.
Valencia's latest analysis indicates a downside bias for gold prices following the formation of a 'short-swallow' chart pattern on Friday, reinforcing the head and shoulders pattern that suggests further declines. Spot gold ended Friday's session down $38.29, or 1.63%, at $2,321.64 per ounce.
Valencia identified the next support level for gold at $2,300 per ounce. If this support is breached, prices could fall to a May 3 low of $2,277 per ounce, followed by a March 21 high of $2,222 per ounce. Further declines could see sellers targeting a head-and-shoulders pattern between $2,170 and $2,160 per ounce.
Conversely, if gold prices recover to $2,350 per ounce, key resistance levels would include the June 7 cycle high of $2,387 per ounce, with a potential challenge at $2,400 per ounce.
