As the global market continues to grapple with economic uncertainties, the price of Gold (XAU/USD) is experiencing a downward trend, marking its fourth consecutive day of decline. This is largely due to a strengthening US Dollar and a dampened market sentiment, primarily influenced by China’s economic situation.
The US Dollar Index (DXY), despite its defensive stance around 102.60, maintains an upward trajectory, albeit without significant momentum. However, geopolitical tensions between the US and China are fuelling the demand for the US Dollar as a safe haven, thereby exerting pressure on gold prices. Furthermore, positive US housing data and hawkish signals from the Federal Reserve are also contributing to the decline in gold prices.
Adding to the woes of the precious metal is China’s diminishing demand for gold. Recent reports indicate a consecutive monthly decline in China’s gold demand, raising concerns as China is one of the world’s largest consumers of gold.
As the market anticipates Federal Reserve Chair Jerome Powell’s bi-annual testimony, gold sellers may face a challenge. However, the likelihood of buyers returning to the market remains low.
Technical indicators suggest that gold prices have already breached key short-term support levels around $1,936 and $1,931. The round figure of $1,930 and the previous bottom of approximately $1,925 are currently challenging the sellers.
In the event of a breach below $1,925, gold prices could potentially be dragged towards the $1,900 mark. On the flip side, any upward movement beyond $1,936 will need to surpass the $1,945 hurdle to negate the bearish bias.
As the market awaits Powell’s testimony, the future of gold prices hangs in the balance, with the potential for significant shifts in either direction.