Gold has experienced a remarkable surge this year, reaching an all-time high near $2,450 in early May. However, the momentum has recently waned, with prices declining by more than 4% from their recent peak over the past few trading sessions.
Investors are beginning to shift their focus, seeking more attractive opportunities as market dynamics realign with fundamentals. Following the speculative frenzy in the first few months of the year, the recent correction in precious metals may continue in the near term. This trend could be reinforced if persistent U.S. inflation prompts the Federal Reserve to maintain higher interest rates for an extended period, a scenario likely to bolster the U.S. dollar.
Traders looking for greater certainty in the bearish outlook may wait for more definitive signals. One such indicator would be a breach of the support level around $2,335, where a key trendline intersects with the 38.2% Fibonacci retracement of the March-May rise. A higher-than-average trading volume accompanying this technical breakdown would further validate the signal.
If XAU/USD decisively falls below $2,335, the 50-day simple moving average at $2,325 will serve as a critical defense line against further selling pressure. While breaching this support might prove challenging, a successful breakdown could pave the way for a deeper pullback, directing attention to the crucial Fibonacci level at $2,265, slightly below this month’s swing low.
On the other hand, if prices pivot upward and resume their climb, initial resistance can be found at $2,365, followed by $2,377. Traders should closely monitor this latter level, as a breakout could diminish the likelihood of further weakness and facilitate a move towards $2,420. Continued gains might then bring the all-time high within reach.
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