The drop in gold prices followed a strong rally, but traders are now cautious due to emerging technical signals. A record high followed by a lower close indicates a possible bearish reversal pattern. This does not indicate an immediate change in the overall bullish trend, but could indicate increasing selling pressure. Should gold fall below $2,546.86, the daily swing chart suggests the trend could reverse, with the 50-day moving average of $2,481.37 acting as key support.
Geopolitical risks continue to support gold
Despite the profit-taking, gold remains well supported by strong market sentiment and rising geopolitical tensions. The recent Israeli airstrikes on Hezbollah in Lebanon have increased the geopolitical risk premium, strengthening gold’s appeal as a safe haven. Investors have significant positions in gold, driven by fears of further escalation in the region.
Fed policy and dollar strength are limiting gold’s gains
While gold rose to a new high, the US dollar’s rise (+0.3%) against six major currencies limited gains. Despite this, gold remains up more than 27% this year, with investors focusing on future rate cuts from the Federal Reserve. Markets are closely watching whether the Fed will make another 50 basis point cut this year, which could impact the dollar and potentially reignite gold’s rally.
Gold Market Forecast: Consolidation Expected, Long-Term Bullish Outlook
In the short term, gold may see further consolidation as traders take profits and react to the stronger dollar. However, the long-term outlook remains optimistic, supported by geopolitical risks and expected Fed rate cuts.
If gold stays above $2,600, the rally could resume, with a target of $2,700. The key support levels at $2,546.86 and $2,481.37 should be watched closely. Traders should prepare for short-term volatility, but expect a continued uptrend in the long term.