Gold prices slipped on Thursday, retreating from a two-week high of $3,345, as a stronger U.S. dollar and solid economic indicators reduced the metal’s appeal as a safe-haven asset.
The decline followed the U.S. House of Representatives’ approval of a debt-heavy budget proposed under former President Donald Trump, which is projected to add $4 trillion to the national debt ceiling. While the move temporarily bolstered investor confidence, it also sparked concerns over long-term fiscal stability, prompting a rally in the U.S. dollar. A stronger dollar typically weighs on gold prices by making the metal more expensive for foreign investors.
Further pressure on gold came from robust economic data. The latest S&P Global Purchasing Managers’ Index (PMI) readings exceeded expectations, signaling continued economic expansion. The Manufacturing PMI climbed from 50.2 to 52.3, while the Services PMI rose from 50.8 to 52.3, both suggesting a healthy pace of growth and easing fears of an imminent recession.
Meanwhile, existing home sales dipped to a seasonally adjusted annual rate of 4 million units in April 2024, as elevated mortgage rates continued to curb buyer activity.
Despite recent softness, gold’s longer-term outlook remains bullish, driven by persistent geopolitical tensions. Heightened conflict risks between Israel and Iran continue to underpin medium-term demand for safe-haven assets like gold.
Technically, gold remains in a consolidation phase just below the $3,345 resistance level. The metal is currently trading within a descending channel on the daily chart. After bouncing off the 50-day simple moving average (SMA), gold has approached the channel’s upper boundary. A breakout above $3,350 could signal further upside, with potential targets at $3,400 and $3,500. Additionally, the Relative Strength Index (RSI) is rebounding from mid-levels, suggesting building positive momentum.
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