Gold Price Prediction As the Commodity Breaks Out Lower

Summary:

Gold has been trading sideways for the last three sessions, but has broken lower, and the $2,030 psychological support is within reach.

Gold prices continue to struggle on Monday, with the commodity hovering around the $2,020 per ounce mark. Spot gold was going for $2,022, representing a decline of -0.11% at 11:40 am GMT. On the other hand, gold futures at COMEX were trading at $2035, having shed -0.15%. The yellow metal traded sideways for most of last week but seems to have registered a downward breakout on Monday.

Market fundamentals still favour gold, as traders put their money on the continuation of a hawkish US interest rate policy. The US dollar has remained strong, with the DXY dollar index at 104.18, a 24-hour rise of 0.10% at the time of writing. Furthermore, gold has had to contend with strong US Treasury yields, which stood at 4.15% and 4.15% for the 10-year and 5-year bonds, respectively, at the time of writing.

Asian markets have closed for the Lunar New Year holiday, and the US headline CPI will define the next course of action. Consensus estimates expect January inflation to come at 0.3%, for an overall rate of 3.0%. A figure above this will support gains by the US dollar, as it could prolong the wait for the Fed’s favoured 2.0% inflation target.

Meanwhile, an uptick in Middle East conflict could bring safe haven-focused investments towards gold. The latest war concerns revolve around Israel’s planned ground assault on Gaza’s 1.5 million refugee city, Ramah. On the flip side, a ceasefire deal to end the war will leave gold under pressure. There’s also a need to keep an eye on the futures market, as it serves as a key indicator of investor sentiment. The latest such data shows a bullish sentiment, as 10,616 new net-long position contracts were added in the week ending February 6^th.

Technical analysis

Gold remains under pressure during intraday trading. Gold futures will likely pivot at $2,029, with bearish control likely to push towards the first support at $2,019. Further momentum loss could see the price move further down to test 2,011. However, price action above $2,029 could create the momentum for bullish control, with the first resistance likely to come at $2,038. Furthermore, a break beyond $2,038 will invalidate the bearish scenario, setting the stage to meet the second resistance at $2,044.