Gold endured a challenging week, marking its most substantial decline in seven weeks. The precious metal faced headwinds from a stronger dollar and elevated bond yields as investors grappled with the implications of the latest U.S. inflation data and awaited further economic indicators.
The most-active December gold on New York’s Comex concluded the week’s trading at $1,946.60 after a final transaction at $1,945.70 per ounce on Friday. This reflected a marginal decrease of $3.20 or 0.1% for the session. Over the course of the week, the benchmark U.S. gold futures contract experienced a decline of $29.50, equivalent to 1.5%.
Meanwhile, the spot price of gold settled at $1,913.88, registering a minor gain of $1.52 or 0.1% during the session. However, the overall week saw a decrease of $27.74, representing a decline of 1.4%.
Market observers noted a pattern of buying interest emerging at the lower levels around the low-$1,900s, which then led to selling as gold strengthened. This dynamic has contributed to limiting the price range, according to Philip Newman, Managing Director of Metals Focus. Newman highlighted that investor focus remains largely on expectations regarding interest rates, influenced by the Federal Reserve’s consistent messaging that rate reductions are not imminent and are projected to occur in 2024.
Recent data revealed that U.S. consumer prices moderately increased in July, with core inflation experiencing its smallest annual gain in almost two years. This development has fueled speculation that the Federal Reserve may be concluding its rate hike cycle.
Nevertheless, San Francisco Fed Bank President and CEO Mary Daly stressed the need for further progress before concluding that the Fed’s actions have adequately controlled inflation.
The U.S. dollar index and the benchmark 10-year Treasury bond yields both recorded their fourth consecutive weekly gains. Rising interest rates typically lead to higher bond yields and increase the opportunity cost of holding non-yielding assets like gold.
Gold: Price Outlook and Inflection Point
Against this backdrop of market activity and challenges, gold finds itself at a critical juncture. Despite a week of relatively subdued movements, the metal’s price outlook remains pivotal.
Notably, the rejection at the $1,947 high has steered spot gold towards the ascending 200-day Simple Moving Average (SMA) at $1,902. A breach of this level could extend the decline towards the 50-week Exponential Moving Average (EMA) at $1,896, according to SKCharting’s Dixit.
A daily close below the dynamically positioned 5-week EMA at $1,919 would maintain the short-term bearish trend for spot gold, Dixit added.
Dixit further emphasized the significance of the $1,902-$1,896 zone, anticipating that the market’s reaction within this range would significantly influence gold’s future price action. Depending on this response, the metal could either witness a deeper correction towards $1,850 or resume the short-term uptrend towards $1,950.
Should buying activity emerge within this zone, the clearance of the 5-day EMA at $1,919 could pave the way for immediate resistance at $1,929. A robust breakthrough beyond this threshold could potentially lead to further advancement, targeting the $1,941-$1,946 range.
As market participants closely monitor gold’s trajectory, these crucial price levels are poised to shape the metal’s direction in the immediate future.
