Gold price falls to 6-day low amid fed policy and pending home sales data
Gold price drops 2%, testing key support amid macroeconomic headwinds.
Gold price's recent decline has raised concerns about its ability to extend its bullish streak, with macroeconomic factors adding pressure to its outlook.
Yesterday, gold dropped 2% to a six-day low near $2,890, breaking below a four-day consolidation range between its all-time high of $2,956 and key support at $2,920. The decline was cushioned by the 100 EMA and the Fibonacci 0.786 retracement level, allowing for a partial recovery. However, resistance at $2,920 now reinforced by the 50 EMA has led to renewed selling pressure.
In today’s European session, gold has declined another 0.3% to $2,905 as price action remains bearish following rejection from $2,920. RSI on the daily chart has shifted from overbought to bullish territory, which, combined with recent support levels, may encourage buyers to attempt reclaiming the $2,920 level. However, short-term momentum remains weak, as seen on the four-hour RSI, which remains in bearish territory, suggesting further downside risk.
Gold price dynamics (February 2025). Source: TradingView
Fed policy concerns and U.S. home sales data weigh on gold price outlook
Macroeconomic factors are also adding to gold’s struggles. Analysts believe that former President Trump’s plans for higher tariffs have raised inflation concerns at the U.S. Federal Reserve, potentially leading to prolonged higher interest rates. Since gold offers no yield, sustained high rates could limit its upside potential by making interest-bearing assets more attractive.
Additionally, investors are monitoring the release of U.S. New Home Sales data later today, projected at 679K compared to the previous 698K. A stronger-than-expected reading could bolster the U.S. dollar, exerting further pressure on gold prices. This data serves as a leading indicator of economic health, influencing market sentiment and potentially impacting gold’s price trajectory in the short term.
Overall, while technical support levels could spark a near-term rebound, macroeconomic headwinds and key resistance zones suggest gold faces continued pressure unless a decisive break above $2,920 occurs.
Gold fails to sustain a breakout reversing within a 1.2% range as buyers lost momentum. Safe-haven demand persisted due to concerns over Trump's tariff plans, keeping prices near record highs.
