The price of gold faced pressure on Monday as US bond yields rose and the dollar strengthened, leading to a two-day sell-off at the end of last week. While Bitcoin soared to a new all-time high, gold remained range-bound, struggling to break out.
The metal’s recent struggles are a reflection of growing expectations of a less dovish stance from the US Federal Reserve this week. With continued strength in the dollar and rising bond yields, the opportunity cost of holding non-yielding assets like gold has increased.
Furthermore, the surge in cryptocurrencies has dampened demand for safe-haven assets like gold. Unless the Fed surprises with a dovish cut or China announces more stimulus measures, gold may continue to face challenges in the near future.
China’s Economic Weakness and Its Impact on Gold
China’s weak economy could provide some support for gold, as top leaders signal stronger stimulus to boost consumer demand. The country, the world’s largest consumer of gold, is struggling with slowing growth, as evidenced by recent data releases.
The latest data showed a significant drop in growth to 3.0% year-over-year, well below expectations. While further stimulus measures may support growth, structural issues remain unresolved. The upcoming Lunar New Year could also impact gold demand, as the holiday season usually sees increased jewelry purchases.
Technical Analysis and Trade Ideas for Gold
Despite maintaining higher highs and higher lows, the lack of new highs since October suggests a shift in momentum for gold. With key resistance levels holding last week, the short-term path of least resistance may be to the downside.
Key support levels to watch are at $2645 and $2600. A break below $2645 could signal further downside towards $2600 and potentially $2580. On the other hand, resistance levels at $2675 and $2710-$2725 are crucial for any bullish momentum.
Overall, the outlook for gold remains uncertain, with potential upside from China’s stimulus efforts and downside risks from rising bond yields and the crypto surge. Investors should closely monitor key levels for potential trading opportunities.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research before making any investment decisions.