As risk-off sentiment gains momentum, the price of gold is experiencing a downward trajectory for the second consecutive day, with the focus now set on a potential drop to the $1,950 mark. The initial optimism stemming from the Federal Reserve’s decision to maintain interest rates last week has been curbed, as investors reassess their forward-looking positions amid recent hawkish remarks from Fed officials.
The recent disappointment in China’s trade balance figures, which fell short of expectations, has intensified concerns over the global economic outlook, particularly as fears of a slowdown in China’s goods exports loom large. This development has reignited apprehensions among investors, prompting a shift towards risk aversion and contributing to the decline in gold prices.
Minneapolis Fed President Neel Kashkari’s assertion that the Fed will closely monitor inflation and labor data before making any significant policy adjustments has added further pressure on gold prices. His comments align with the prevailing consensus within the Federal Reserve, emphasizing the need for concrete data signals before any potential changes in the interest rate policy.
Despite the recent downturn, gold bids managed to regain some ground, hovering around the $1,970 region. However, the overall sentiment remains bearish, with the XAU/USD facing a 2% drop from its recent peak above the critical $2,000 threshold. Notably, the current price of gold is still holding above the 200-day Simple Moving Average (SMA), providing some support at the $1,940 level.
Market participants are closely monitoring the ongoing developments in the global economic landscape, especially the evolving dynamics in China, and the continued stance of the Federal Reserve on monetary policy. As gold grapples with the current market volatility, investors are bracing for further fluctuations in the precious metal’s value in the days ahead.