At the beginning of this week, gold prices took a hit as they slipped below the $2320 mark. This downward pressure was also influenced by the lack of safe-haven appeal due to quiet geopolitical events over the weekend. The back-and-forth price action last week, driven by market reactions to potential interest rate hikes and the PPI data, has left gold prices vulnerable.
On the other hand, the US Dollar Index (DXY) experienced gains as it approached a key resistance level at 105.63. The possibility of “higher rates for longer” has been looming over market participants, leading to increased interest in US Treasuries rather than gold. The rise in US treasury yields is indicative of this sentiment.
With Central Bank meetings scheduled in Australia, UK, Norway, and Switzerland this week, the focus may shift away from US data. While US retail sales data is set to be released on Tuesday, only a significant beat or miss is likely to cause notable market movements. Federal Reserve policymakers will also be speaking this week, and their comments following recent data releases will be closely monitored.
In the midst of ongoing developments in the Middle East, the dissolution of Israeli Prime Minister Benjamin Netanyahu’s war cabinet has raised concerns about potential escalation. Any increase in tensions, especially with Hezbollah on the Lebanese border, could lead to a resurgence of the safe-haven appeal for gold, pushing prices back towards $2400.
From a technical standpoint, gold is coming off its best week in four, with a bullish engulfing candle signaling a possible uptrend. However, on the daily chart, a head and shoulder pattern has emerged with a neckline around 2320-2325. The range-bound movement between 2333 and 2300 on the H4 time frame indicates potential volatility in the coming days.
Overall, gold prices are facing downward pressure due to the strengthening US dollar and lack of safe-haven demand. Geopolitical risks remain a significant factor to watch, as any escalation could quickly change market sentiment. Traders and investors will be keeping a close eye on central bank meetings, US data releases, and Federal Reserve commentary for further clues on gold price movements in the near term.