Gold continues to pullback after the recent monthly jobs report from the US economy surprised traders, and it has increased expectations that the Fed will not hike rates as the unemployment rate moved higher.
As weak economic data ignites new recession fears, markets start to front-run the Federal Reserve pricing in rate cuts, which is likely to be bearish for gold as it does not fare well in recessions.
This new shift in interest rate expectations is creating a challenging environment for gold because it is supporting the US dollar, which is trading at a three-month high. To top it all off, the summer is traditionally a weak seasonal time for the precious metal.
Recent data also showed a dip in central bank buying in April. Although not the primary driver of gold prices it is certainly noteworthy in terms of the weakening fundamentals for gold.
Technically, the price of gold has been hugging the $1,950 level. In fact it is very visible that gold has in fact struggled to move under $2,000, which is a really positive sign for gold bugs.
Going forward, it’s imperative that gold price move back above $1,980 or else we could see a steep drop back to the $1,900 support zone in the coming days and weeks.
Current sentiment metric towards gold shows that hints that this current price action is probably bearish, but a stepper correction may not happen as the sentiment bias is not that severe.
The ActivTrader market sentiment tool shows that just 47 percent of traders are bullish towards gold. Going forward, we really need to see a much strong negative bias by retail to help the chances of a sustained rally.
Gold short-term Technical Analysis
According to technical analysis gold the price of gold has stayed below its 200-period moving average, meaning that the short-term price trend remains bearish the $1,990 level, which is close to last week’s swing high.
It is also noteworthy that gold has invalidated a head and shoulders pattern and still has tremendous scope to move into a much higher trading range in future.
Gold Medium-term Technical Analysis
The daily chart shows that the yellow metal holds inside the Ichimoku cloud, which means that it is probably not wise to take a trade as price movement inside the cloud is usually a neutral signal.
We could see the price of gold making a move above the cloud the $2,070 could come next, however, a move under $1,930 could see gold tumbling towards the $1,900 to $1,870 area.
