Gold prices briefly touched a more-than-a-week low in early Wednesday trading. The decline followed yesterday’s steep losses, but the fall halted just above the $4,000 mark, underscoring this key psychological level as a strong area of support. The recent losses reflect an improvement in market risk sentiment following a de-escalation in tariff-related tensions between the US and China. Another headwind for the precious metal has been the recent strengthening of the US dollar, which tends to weigh on bullion due to the inverse price correlation between the two assets. Finally, the strong gains seen in recent weeks meant that, from a technical perspective, gold had entered overbought territory, prompting many traders to close positions and lock in profits. Against this backdrop, the key question is whether the strong upward trend in gold prices has come to an end, or whether yesterday’s correction was merely a dip that traders will view as an opportunity to re-enter at a more attractive level. Considering the ongoing geopolitical turbulence, economic uncertainty, expectations of dovish monetary policy, and continued central bank purchases — all supportive factors — it would take some conviction to bet against further gains for the precious metal.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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