In the early stages of the new week, the Gold price (XAU/USD) has encountered a weakened stance, maintaining a downward trend during the initial European session, thereby snapping a two-day winning streak. The subdued performance can be attributed to investors recalibrating their expectations of a more aggressive policy easing by the Federal Reserve (Fed), given the persistent resilience of the US economy. Additionally, influential Federal Reserve policymakers’ recent hawkish comments have tempered market expectations of an imminent rate cut, leading to a notable shift in capital away from the non-yielding precious metal.
The prevailing positive sentiment in equity markets further contributes to the downward pressure on Gold prices. Despite this, looming risks of heightened geopolitical tensions in the Middle East and ongoing concerns about China’s economic slowdown may provide some support to the safe-haven appeal of XAU/USD. Simultaneously, a flight to safety has put pressure on US Treasury bond yields, leaving US Dollar (USD) bulls on the defensive, a factor that could help mitigate further losses for Gold and urge caution among bearish traders.
Technical Analysis: Gold Price Vulnerable Below $2,020 Support Level
Analyzing the technical aspects, a breach below the immediate support zone of $2,022-2,020 may expose the psychologically significant $2,000 mark, representing a one-month low witnessed last week. This level is crucial, as a decisive break could render Gold vulnerable to further declines. Subsequent downward movements may target the $1,988 intermediate support, leading towards the 100-day Simple Moving Average (SMA) at approximately $1,972 and the 200-day SMA in the $1,964-1,963 region.
On the contrary, the Friday swing high, situated around the $2,040-2,042 supply zone, remains a formidable barrier. An extended strength beyond this level could initiate a short-covering rally, propelling XAU/USD towards the $2,077 region. Should the bullish momentum persist, a breach of the $2,100 round-figure mark may be within reach.
