Gold prices have seen notable volatility at the start of the week, trading near $2,700 after a period of sharp fluctuations on Monday. The precious metal initially saw some bullish momentum, climbing to nearly a two-week high of $2,721 in early trading. However, this rally was short-lived, with sellers quickly regaining control after five consecutive days of gains, leading to a correction. With ongoing shifts in the broader market, the question remains: Are we witnessing a potential turning point for gold, with sellers poised to dominate?
Sellers Regain Momentum Amid Strong US Economic News
Gold’s brief rally was largely driven by the US Dollar’s bearish opening, as it was accompanied by a dip in US Treasury bond yields. The market’s reaction to news over the weekend that US President-elect Donald Trump had appointed billionaire Scott Bessent as Treasury Secretary played a significant role in shaping the early trading session. Bessent is a veteran of Wall Street and known for his fiscal conservatism, which reassured investors regarding the stability of the US Treasury market. His appointment prompted a sharp retracement in US 10-year Treasury bond yields, which saw a pullback to around 4.30% at the time of writing.
In tandem with the bond yield drop, the US Dollar tracked the move, trading 0.65% lower against its major counterparts. This combination of falling yields and a weakening dollar created an initial tailwind for gold. Despite this, the yellow metal struggled to maintain its upward momentum, instead experiencing a sharp correction.
Geopolitical Developments and Risk Sentiment Impacting Gold
One of the main drivers behind gold’s failure to capitalize on the broader market shifts has been improving risk sentiment. Geopolitical tensions, which have often acted as a catalyst for gold’s price rallies, showed signs of easing, particularly between Israel and Lebanon. According to reports from Israeli and US officials, Israel and Lebanon were reportedly close to reaching a ceasefire agreement, which helped to calm fears of a broader regional conflict. This development, along with reduced uncertainty around the incoming Trump administration, contributed to a more risk-on environment, which dampened demand for safe-haven assets like gold.
Furthermore, many traders are taking a more cautious approach ahead of the US inflation data release scheduled for Wednesday. The market is also navigating through a holiday-shortened Thanksgiving week, which has added a layer of uncertainty and restrained some market movements.
As a result, despite the pullback in the US Dollar and Treasury yields, gold’s traditional role as a hedge against economic uncertainty has been somewhat diminished. This shift is reflective of the current market environment, where risk sentiment and broader geopolitical factors have outweighed the immediate bearish moves in the dollar and bond yields.
Gold’s Technical Indicators Suggest Possible Bearish Shift
Technically, gold appears to be facing some challenges. After reclaiming all major daily Simple Moving Averages (SMA) on Friday, the precious metal has stalled in its recovery near the $2,720 level. Gold’s failure to break through this critical resistance level, despite favorable conditions early in the session, suggests that the path of least resistance may be turning lower.
The 14-day Relative Strength Index (RSI) is also signaling potential weakness. After reaching a high of 58, the RSI has now retreated toward the 56 level, indicating a loss of bullish momentum. A lower RSI could signal that buying pressure is waning, and sellers may be gaining control of the market.
Moreover, the technical outlook continues to suggest the possibility of a bearish crossover. The 21-day SMA is now closing in on the 50-day SMA from above, and if this cross occurs on a daily closing basis, it could validate a bearish signal for gold. This “Bear Cross” has historically marked periods of downtrend, and if it plays out, it could signal further downside for the precious metal.
Support and Resistance Levels to Watch
Gold’s immediate support is located around $2,670, where the 21-day and 50-day SMAs converge. A sustained break below this level could prompt a fresh downtrend, with the next support target at $2,600. The low of $2,619, seen on November 20, is another key level to watch, and a breach of this could further accelerate the bearish sentiment.
On the upside, for gold to resume its bullish trend, buyers would need to push prices above the November 5 high of $2,750. A decisive daily close above this level could re-energize the buying momentum, paving the way for a test of the all-time high of $2,790. However, until such a breakout occurs, the risk of further downside remains prominent.
Conclusion
The outlook for gold in the near term appears to be increasingly weighed toward the bears. Technical indicators, including the approaching Bear Cross and the downward shift in the RSI, suggest that the precious metal could face more downside pressure in the coming days. Meanwhile, improving geopolitical sentiment and a more stable risk environment have reduced the demand for gold as a safe-haven asset.
With the US inflation data release and continued geopolitical developments in the Middle East, gold traders will be watching closely for any signs of fresh volatility. However, unless there is a decisive shift in market sentiment or a significant break above key resistance levels, sellers appear to have the upper hand in the short term. Gold’s future price direction will ultimately depend on the interplay between risk sentiment, economic data, and technical indicators, but the signs of bearish pressure are mounting.
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