Gold prices registered the biggest daily drop since February 2023, as it lost 2.15% to trade at $2340 per ounce at the spot market on Monday. Futures gold declined by a smaller margin, going down by 2.46% to trade at $2335 per ounce. The precious metal has experienced a stratospheric rise in 2024, registering multiple all-time highs driven by safe haven demand. However, the safe haven appetite seems to have cooled down, with the calming of geopolitical pressure from the Russia-Ukraine war and between Israel and Iran.
The yellow metal is likely to remain under pressure as the dollar’s fundamentals remains strong. The Federal Reserve is expected to retain the current 5.25%-5.50% interest rates beyond June, and that will provide support for the dollar well into the second half of the year. Furthermore, yields on the benchmark 10-year and 5-year US treasury bonds have remained stable above 4.600% and that possess a challenge for gold. Gold and US Treasuries are considered substitute investment assets, and the sustained high-yields by the Treasuries are a source of headwinds for non-yielding gold.
In a rare occurrence, gold prices kept soaring between March and April, despite high US interest rates and high US treasury yields. This underlines the propulsion power of safe haven demand. China has led the world in gold purchases in recent times, with its central bank purchasing the commodity for 17 consecutive months, amid underperformance by the world’s second-largest economy.
In addition, retail demand for gold has spiked significantly in China, with the country’s retail consumers buying 630 tons of gold to pass India 562 tons and become the world’s leading retail market for gold. If this trend continues, gold prices could reverse recent losses and hit new ATHs in the coming weeks.
Technical analysis
Gold price is on a downward momentum, and the downside will prevail if resistance remains at 2351.25. That could see the sellers break the support at 2323.98, and potentially build the momentum to test 2310.15. However, a move above the 2351 pivot mark will signal control by the bulls, with resistance coming at 2373.39. A continuation of the bullish control at that mark could build momentum to breach the resistance, invalidate the downward narrative and potentially test 2393.41.
