Gold prices have been experiencing a pullback, retracing from the recent surge towards record highs. Despite the recent weakness, the price remains in a positive trend, largely supported by its status as a safe-haven asset. However, investor sentiment is shifting, influenced by external factors like U.S. economic developments and geopolitical events, particularly trade negotiations involving President Donald Trump.
RSI Keeps Gold in Check
The Relative Strength Index (RSI) has played a crucial role in keeping gold from reaching overbought territory. A pullback in gold prices helps prevent the RSI from entering overbought conditions, which could signal a weakening of the upward momentum and a potential reversal in price. The price of gold struggles to maintain its recent gains, particularly as geopolitical risks, such as the trade war, appear to wane.
Impact of Trump’s Trade Deal Announcement
President Trump’s recent announcement regarding the trade deal with the United Kingdom has created a shift in investor sentiment. The optimism surrounding this “historic” deal and the prospect of more trade deals in the future could reduce the appeal of gold, traditionally seen as a hedge against geopolitical and economic uncertainty. As the threat of a trade war recedes, investors may begin to move away from gold in favor of riskier assets, such as equities, as they anticipate greater economic stability.
Gold Price Trend and Key Levels to Watch
Current Trend: Despite the pullback, the price of gold is still above its 50-Day Simple Moving Average (SMA) at $3121, which suggests that the upward trend remains intact. However, if gold fails to hold above this moving average, it could signal a shift in trend direction.
Resistance Levels: The price of gold is currently pulling back from its recent record high of $3500. A critical level to watch is $3370, which represents a 161.8% Fibonacci extension. If the price moves back above this level, the focus will shift towards the April high of $3500 and the next major resistance around $3540.
Support Levels: On the downside, the immediate support levels are around the 100% Fibonacci extension at $3280 and the monthly low at $3202. A breach of these levels could pave the way for a deeper pullback, with potential support zones at $3160 (161.8% Fibonacci extension) and $3120 (61.8% Fibonacci extension).
Conclusion
Gold prices are experiencing a temporary pullback from the recent highs, but the overall bullish trend remains intact as long as prices stay above the 50-Day SMA. The pullback is likely driven by a shift in investor sentiment following geopolitical developments, particularly the resolution of trade tensions.
However, the long-term outlook for gold remains positive, especially as it continues to serve as a safe-haven asset in uncertain times. Traders should closely monitor key support levels around $3280 and $3202, as well as the potential for a rebound towards $3370 and the record high of $3500.
In summary, while gold may face short-term weakness, the overall bullish trend is still in play, with the potential for prices to continue tracking higher if investor sentiment shifts back to risk-off in response to any new geopolitical or economic uncertainties.
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