- Gold consolidates below $4000 as the Dollar Index strengthens above the 200 Day SMA.
- Chinese Central Bank PBoC slows Gold purchases as tax policy changes dampen demand.
- Optimism in the US-China trade deal reduces safe-haven demand for Gold.
- Data vacuum creates uncertainty about economic conditions.
- Price stability below the key resistance $4030 pauses the gold rally.
The strong and one-sided bullish rally in that recorded an all-time high of $4380 was spectacular, historic, and stubborn, with literally no pullback and extremely overbought conditions on higher time frames. RSI on the monthly time frame was screaming at 92+ as the momentum was unstoppable.
However, like all good things, this too had to take a break, and here it is. Gold has retraced from $4380 record high to $3886, roughly $500 correction.
1st Fibonacci retracement of 23.6% was at $4129, followed next by 38.2% retracement at $3973 and next upcoming retracement of 50% sits at $3846, followed by 61.8% retracement at $3720
Recently, Gold has been trading sideways with traders prioritizing buy the dip as value buying was suitably rewarded with $100-$150-$200 daily swings becoming a new normal during unprecedented volatility and wide range.
As the US government shutdown enters its 35th day, fiscal administration is at a standstill, key economic data releases are put on hold, leaving limited clues for market and economic situation assessment. Tomorrow’s upcoming data is widely awaited for further action.
continues to strengthen above 200 Day SMA dynamically positioned at 99.20, while prevailing strength hovers at 100 mark, and next immediate upside potential may reach 100.50, and near-term upside may extend to 101.50
The has an inverse relation with Gold, and a strong Dollar usually keeps Gold under pressure as the opportunity cost of holding dollar-denominated Gold increases substantially, thereby reducing the appeal for the non-yielding asset in comparison to yielding Bonds.
Moreover, there is growing optimism about the US-China trade deal, with China importing 1,80,000 tonnes of , which may be seen as an ice-breaking gesture, reducing global tensions on tariff front.
Short-term Outlook
The $500 drop off the record high of $4380 to $3886 is a healthy price correction with still room for some more consolidation, and if price breaks below the recent low of $3886 and 50-day EMA $3870 will expose 50% retracement zone $3846, followed by the 61.8% retracement zone $3820
On the flip side, if Gold breaks above $4000, the upside momentum will face an immediate hurdle at $4015-$4026–$4030-$4045 followed by a higher resistance cluster comprising of zones lined up as $4070-$4090-$4110, while major resistance sits at $4135-$4190
Overall Outlook
The prevailing downward shift in momentum is a part of natural price correction, which may have room to extend further to $3846-$3820 or even a tad lower. This correctional wave is a temporary phenomenon that is followed by a strong impulse in line with the primary trend.
