Gold prices recently surpassed the critical $3,000 per ounce mark, a significant psychological level in the market. Despite successfully holding above this milestone, large-scale profit-taking led to nearly a 1% decline in prices last Friday. While some analysts predict a potential pullback, they also believe that sustaining this level in the long run could reinforce gold’s upward trend.
Technical Analysis and Support Levels
Using the Fibonacci retracement method, analysts have identified key support levels in the gold market. These levels create a “defense system” that may play a crucial role in the ongoing tug-of-war between market bulls and bears if gold continues to weaken. Key levels to watch include the $2,955 mark, which served as the rally’s previous high and now acts as critical support.
Insights from Wall Street Analysts
George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, highlighted that fluctuations around the $3,000 level in the coming months would boost market confidence. While short-term peaks may not be reached, there are no major bearish factors expected to pull prices significantly lower.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, emphasized that even a $100 decline would not disrupt the ongoing bull market. For investors concerned about stagflation, a pullback may offer an opportunity to increase gold holdings, especially with the $2,955 support level in place.
David Morrison, Senior Market Analyst at Trade Nation, noted that the daily MACD remains elevated but has not yet reached overbought territory. A price retracement could provide momentum for a new rally. However, the sustainability of the $3,000 support level remains under close scrutiny.
The Inflation Factor
Inflation data will play a pivotal role in gold’s trajectory. Thuy Lan Nguyen, Head of Research at Commerzbank, pointed out that the Federal Reserve’s recent revision of its 2025 inflation forecast from 2.5% to 2.8% could dampen gold’s momentum. If inflation spirals out of control, as seen during 2021-2022, gold may face short-term pressure. However, any dip below $3,000 could be seen as a buying opportunity, especially given ongoing geopolitical tensions that continue to boost gold’s appeal as a safe-haven asset.
Revival of Gold ETF Demand
While the market consensus suggests a short-term consolidation phase, demand for gold investments, particularly through gold ETFs, is beginning to revive. The SPDR Gold Shares (GLD), the world’s largest gold ETF, has seen an increase in holdings by 37 tons this year, reaching 910 tons. Although this is well below the historical peak of 1,353 tons in 2012, it indicates a growing interest in gold as an investment. Unlike previous cycles, where ETF demand peaked alongside prices, this rally (with a 62% gain over the past year) shows a disconnect between ETF demand and price movements. Nonetheless, analysts believe that ETF inflows could drive further price gains in the coming months.
Conclusion
Gold’s ability to hold the $3,000 level is critical for market sentiment. While short-term corrections are expected, analysts view this as a healthy consolidation phase that could strengthen gold’s long-term upward trajectory. Inflation risks, geopolitical tensions, and the revival of gold ETF demand are expected to play key roles in shaping future price movements. Even if gold temporarily dips below $3,000, the overall bull market remains intact.
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