The gold market is teetering on the edge of a potential decline, with the prospect of gold dwindling below the $2,500 threshold becoming increasingly likely. This is due to signs of a ‘bearish engulfing candle’ – a potential indication of decreased value. This speculative trend drives pressure on vital support levels, despite expectations of the Federal Reserve rate cuts and rising geopolitical conflicts.
Observing current trading figures, there has been a downward trend in gold price, sitting around $2,511.06 with an intraday low of $2,505.62. This drop is primarily attributed to a mild regeneration of the US Dollar. However, potential Federal Reserve rate cuts and escalating geopolitical tensions in the Middle East may offset further loss. Investors in gold need to brace for potential market fluctuations under these conditions.
In his recent speech at the Jackson Hole symposium, Jerome Powell, Chair of Federal Reserve, alluded to future rate cuts, though the US Dollar strengthened on Wednesday. If the Fed acts on Powell’s hints, the appeal for the yellow metal may rise but the recent US Dollar strength could muddy the waters.
Dwindling gold prices amid strengthening dollar
This delicate balance could trigger volatility in both gold prices and the forex market.
Consumer confidence saw a surge in August, peaking at 103.3. In contrast, the US Housing Price Index slipped by 0.1% in June, missing market growth forecasts of 0.2%. Traders are expecting a total of 100 basis point rate cuts by the year-end, which could uplift gold prices, but any strength in the US Dollar might limit possible gains.
The international trade uncertainties coupled with geopolitical instabilities, especially in the Middle East, feed into the volatile price of gold. Last week, Gold ETF holdings increased, reaching a six-month high, but the value of gold slid amidst a robust US Dollar. Hence, the geopolitical landscape and a sturdy U.S. dollar continue to dictate gold prices.
Despite the attractive qualities of gold and indicative factors like growing geopolitical risks and reduced interest rates, gold market is facing a downturn due to profit-taking and a stronger US Dollar. The short-term projection for gold shows a strain around the $2,511.06 mark. Crossing the crucial $2,500 support level might trigger further losses. Gold price, marked by a bearish engulfing candle, points towards the possibility of further decreases.
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