This morning, gold went up a little bit after it went down on Friday. But, even though European stock markets did well today, and oil prices went down, it seems like people aren’t as interested in safe investments right now.
Also, new information about how much people are spending in the US is making it less likely that the Federal Reserve will lower interest rates in June. That’s not good news for gold because usually when interest rates go down, gold prices go up.
So, there’s a chance that gold might keep going down, especially since on Friday, its price dropped a lot after reaching a really high point. People who usually sell gold (we call them gold bears) might start selling more if they see gold’s price going down consistently for the next few days. They’ve had a tough time recently because gold prices have been going up a lot, almost 20% in the last few weeks.
Gold analysis: Geopolitical risks could keep gold supported on dips
Last Friday, the price of gold went up to more than $2400 per ounce, hitting a record high of $2431. This happened because traders were worried about Iran possibly attacking Israel over the weekend. When there’s uncertainty like this, people usually want to invest in safe things like gold. But by the end of the day, the price of gold went down a bit because some technical signs showed that the price had gone up too quickly.
Still, if tensions between Iran and Israel continue, the demand for safe investments like gold could go up again, especially if there’s a significant drop in the price. People might be worried about Israel’s response to a possible attack, which could make them want to buy more gold.
So, if the price of gold goes down a little bit, it might just be a temporary dip, and some people who were waiting might start buying again. But if tensions in the Middle East suddenly calm down, the demand for gold might go down too. But that doesn’t seem likely to happen soon.
Gold analysis: Rising yields increase opportunity cost of holding gold
In simple terms: After gold prices dropped on Friday, they went up a bit today. But, some people might decide to sell their gold to make a profit, especially since the US economy is doing well. As interest rates go up, more people might choose to invest in things like bonds instead of gold because they can make more money. Also, even though the Japanese currency (yen) is not doing well compared to the US dollar, which usually makes gold prices go up, it hasn’t happened yet. This is because Japanese bonds still don’t pay much interest.
Gold technical analysis point to overbought conditions
On Friday, the price of gold went down a lot after reaching a really high point. Now, some traders might think that gold’s price could keep going down this week before more people start buying again. When prices go down, some people see it as a good chance to buy gold at a lower price, hoping that they can make a profit when the price goes up again.
Right now, the price of gold hasn’t gone down much from Friday’s low of $2333. But, if it drops below this level and stays low, more people might sell their gold, which could cause the price to go down further. The next levels to watch are $2300 and then $2270-80. These levels are important because they show where the price might find support, especially where a short-term trend line and a moving average come together.
Looking at the bigger picture, gold’s long-term charts show that prices are likely to keep going up. However, right now, it seems like prices have gone up too quickly, which might mean they could go down for a short time. Last week, gold reached a new high of $2431, but the way it ended the week makes some people cautious. Also, a tool called the Relative Strength Index (RSI) shows that gold is overbought, meaning it’s been bought too much too quickly. This could mean prices will either stay the same or go down a little bit for a few weeks before going up again, which would be good for people who want to buy gold. But, if prices drop sharply, it could make some people who sell gold happy.
If prices keep going down, the next important levels to watch are $2222, $2146, and then $2075-$2081, which are important because they show where the price started going up again after dropping before.
Across all charts, a consistent observation is the RSI indicator residing in overbought territories. The daily RSI, weekly and monthly RSI indicators are all above 70.0, with some signalling extreme levels.
Consequently, the gold chart appears markedly overbought, evident from the RSI indicator and virtually any other metric you consider. Following Friday’s bearish-looking price candle, my inclination leans towards seeking bearish trades concerning the short term, despite my bullish long-term outlook.
Historically, when gold has breached overbought levels, especially on long-term charts, it has typically preceded a sell-off. While past patterns don’t guarantee future outcomes, the prospect of gold retracing somewhat from its current levels merits attention.
Nonetheless, any potential near-term downturn may not signify the termination of the broader upward trend. Rather, traders and investors who missed out on purchasing gold at lower prices are likely to view any dips as an opportunity to enter the market once gold is no longer technically overbought.
