Gold prices slumped Wednesday, after hitting a six-month high in the previous session, weighing on the stronger dollar and higher Treasury yields. However, on Thursday, it showed slight signs of recovery and managed to hold above $1,800. Analysts interpret the market and evaluate the technical outlook of gold.
“Corrective retracement and profit taking”
Spot gold was up 0.25% at $1,808.3 at the time of writing. U.S. gold futures slid 0.1% to $1,815.8. Jim Wyckoff, senior analyst at Kitco Metals, says that after corrective pullback and taking profits, foreign markets are more bearish for metals on a daily basis. He also cites the high dollar and yields that had an impact. The analyst continues, making the following statement:
I see the Fed’s aggressive hawkish monetary policy mostly reflected in prices. You’re starting to see inflation start to recede a bit. Also, China is a real wild card right now.
“Then, a more favorable environment for gold prices will be possible”
Meanwhile, the dollar index (DXY) has stabilized. Also, 10-year benchmark bond yields remained close to their highest levels in more than a month. UBS analyst Giovanni Staunovo comments:
I see Fed rate hikes as a headwind for gold in the near term. But when the U.S. economy slows and the Fed signals the end of rate hikes, a more favorable environment for the yellow metal is possible.
“These will be the main factors affecting gold prices”
Kinesis Money external analyst Carlo Alberto De Casa comments on the developments as follows:
If the Covid situation worsens again in China, it would be potentially negative for gold. However, it is also possible that it will push central banks to be more dovish. This will be positive for gold prices.
Hareesh V., head of commodity research at Geojit Financial Services, says the performance of the dollar, inflation data, the Fed’s rate hike path, developments in China and geopolitical tensions will be the main factors affecting gold prices in 2023.
Bears and bulls eye on this level!
Analysts point out that gold prices still remain above the $1,800 level. Below this level, they say, the bulls may start to lose confidence that the recent upswing below could continue. Gold prices continue to trade above the critical support of 1,800, closely followed by both bulls and bears. Naeem Aslam, chief market analyst at AvaTrade, comments:
This is because traders believe that price action is more likely to move in the right direction as long as the price continues to trade above that price point.
However, OANDA senior market analyst Craig Erlam says investors will likely see a correction early in the new year unless there is a dovish change in the Federal Reserve comment or some positive economic data.
Gold prices technical analysis: Bullish trend continues
Technical analyst Christopher Lewis analyzes the technical outlook of gold as follows. While gold markets continued to see the exit of this channel in Wednesday’s trading session, it pulled back a bit. At this point, $1,800 seems to continue to be important. However, it’s pretty honest that gold continues to garner a lot of attention at this point. At this point, if it can break above the highs, it will eventually make its way towards the $1,875 level, an area that has been important many times. Breaking above this level opens a much larger move, perhaps up to $2,000.
Keep in mind that depending on the situation, interest rates can rise and gold can do the same at the same time. It is possible for the US dollar to rise as gold rises. So keep that in mind too. I know there are many experts who say that this cannot be done. However, all it takes to see how this is not true is to pull out a painting from the 1980s.
The 50-Day EMA is getting ready to cross. Therefore, I think it is likely that we will see this market continue at a higher level in the long run. That doesn’t mean we won’t experience occasional pullbacks. But gold looks set to have a good year. So, I look at these pullbacks as potential buying opportunities. Between now and the end of the year, it will likely be a fairly illiquid market. So I wouldn’t look for big moves. But I definitely see that the bullish situation continues.