Gold price struggles below $2,640 resistance after historic drop
Tariff fears and rate cuts clash with a stronger USD
Gold prices are teetering at critical levels, tossed about by opposing forces that could define their next trajectory. After Monday’s sharpest daily decline in four years, which saw prices dip below the 50-day EMA at $2,640, the metal has since struggled to regain sustained momentum. Currently hovering above the psychological $2,600 support, gold is at a pivotal juncture, with macro and technical factors suggesting potential for either recovery or further declines.
The $2,600 support and $2,640 resistance now serve as decisive benchmarks. A push above $2,640, reclaiming the 50-day EMA, could signal a reversal of this week's losses, paving the way for a climb towards $2,700 and beyond, with Fibonacci extensions indicating further upside potential. Conversely, a breach below $2,600 could open the door to deeper declines. CTAs (Commodity Trading Advisors) positioning is also unlikely to exacerbate downside flows until prices fall south of $2,550.
Gold price dynamics (September-November 2024). Source: TradingView
On the upside, concerns over US President-elect Donald Trump's tariff threats and ongoing Russia-Ukraine tensions have underpinned safe-haven demand, while expectations for another Federal Reserve rate cut in December lend additional support. However, these tailwinds are counterbalanced by Wednesday’s US GDP and PCE data, which highlighted economic resilience and stalled inflationary progress. A modest recovery in US Treasury yields and a stronger dollar further complicate gold's recovery prospects, potentially capping gains.
Traders positioning reveals cautioned gold outlook
Market positioning also reveals mixed signals. Macro funds have already liquidated nearly 60% of their extreme positions post-election, mitigating immediate downside risks. Meanwhile, Shanghai traders’ positions, though on a significant downtrend, appear to have stabilized, suggesting a range-bound outlook for gold in the near term.
In summary, gold price is between a delicate balance, with $2,600 and $2,640 as critical levels. While current conditions point to consolidation, traders are eyeing the next major catalyst that could spark a decisive move in either direction.
Gold price is projected to hit $2,750 by 2025, says Bank of America. Analysts warn of looming headwinds from a stronger US dollar and rising interest rates.
