Early Bearish Patterns Suggest Continued Gold Price Decline This Week

Summary:

The gold market remains in a narrow consolidation as investors waver on the timing of the Fed's interest rate cut this year.

SELL XAUUSD

Close Time

CLOSED

2038.00

Entry Price

1973.00

2060.00

4685.18 +36.46 +0.78%

122.4

Pips

Profit

1973.00

2025.76

Exit Price

2038.00

Entry Price

2060.00

Fundamentals

The likelihood of a rate cut in March was perceived as 50:50 in Friday's trading, marking a significant decrease in rate cut expectations compared to the previous week. The hawkish shift in the Fed's monetary policy was a key factor leading to a sharp drop in gold prices last Wednesday, just above $2,000.

Despite a rebound from recent lows, gold concluded the week in a downward manner. Economic data provided little guidance on the Fed's monetary policy, and investors seem content holding higher-risk assets, suggesting a path of minimal resistance for gold this week is either consolidation or further decline.

Optimistic macroeconomic data released last week in the US indicates ongoing economic resilience, providing room for the Fed to maintain higher interest rates for a longer period. Additionally, hawkish remarks from several Fed officials compel investors to lower expectations for more aggressive policy easing in 2024, further weakening non-yielding gold.

With bets supporting a rate cut decision in March significantly reduced, gold gradually declined towards $2,020. The 10-day SMA around $2,030 consistently acted as resistance, making it challenging for gold to regain appeal.

This week, a survey involving 14 analysts on gold's trend showed a substantial decrease in bullish sentiment from the previous week. Six analysts (42%) predict an increase in gold prices this week, four analysts (29%) anticipate a decline, and four analysts (29%) remain neutral.

Simultaneously, an online poll with 150 votes reflects retail traders aligning closely with expert opinions. 66 retail traders (44%) expect an increase in gold prices this week, while 44 respondents (29%) anticipate lower prices, and 40 respondents (27%) hold a neutral outlook on gold's near-term prospects.

Looking ahead, as investors await key economic data later this week, expected to provide new insights into inflation and interest rate prospects, gold may experience sideways movement at the beginning of the week but could continue to record declines by week's end.

Technical Analysis

After a slight decline on Wednesday and Thursday last week, gold prices edged higher on Friday from just above the $2,000 level, currently finding some support.

The technical outlook in the daily chart remains weak after the recent drop, but bullish hopes persist as bears have not tested below $2,000, and a descending wedge has formed. The potential for a recovery is still anticipated.

The initial resistance on the upside is at $2,026, followed by the 10-day SMA at $2,030, expected to limit the upward movement and maintain bearish pressure to accumulate necessary chips below $2,000. A decisive break below $2,000 would further weaken market sentiment, with the focus shifting to the $1,973 - $,1963 range.

Overall, gold bulls are attempting to offset the bearish trend since the high point of $2,088, but the path to higher levels remains challenging, particularly due to weak support from momentum indicators. In terms of trading, a strategic approach with a focus on positioning is recommended.

Trading Recommendations

Trading Direction: Short

Entry Price: 2038

Target Price: 1973

Stop Loss: 2060

Valid Until: 2024-01-31 23:55:00

Support: 2000, 1980, 1973

Resistance: 2024, 2030, 2042

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