Gold’s Price Decline: Analyzing Key Drivers and Future Projections

Gold’s value (XAU/USD) experienced a significant dip, reaching a six-and-a-half-month nadir in the vicinity of $1,873-1,872 on Wednesday, marking its sharpest one-day drop in two months. Continuing its downward trajectory in Thursday’s Asian session, the metal displays vulnerability following its recent retreat from the pivotal 200-day Simple Moving Average, which was challenged a week prior.

A resounding confidence in the US Dollar (USD) combined with the surge in US Treasury bond yields, seems poised to divert investments away from gold. Anticipations of an additional rate adjustment by the Federal Reserve in 2023 bolster the US bond yields, further propelling the USD. However, the prevailing atmosphere of risk aversion might bolster gold’s appeal as a refuge. These factors and concerns of a potential partial US government shutdown may deter traders from making new commitments to XAU/USD.

Market participants now await the final US Q2 GDP announcement, expected later during the initial hours of the North American trading session. Nevertheless, the primary spotlight will be on Friday’s US Core PCE Price Index, promising insights into the Federal Reserve’s prospective interest rate adjustments, which will influence gold’s non-yielding position.

Gold’s Technical Perspective

Technically, gold’s restrained price fluctuations can be interpreted as a bearish stabilization. The evident absence of buying momentum indicates gold’s inclination towards a downward trajectory.

However, with the Relative Strength Index (RSI) on the daily chart just entering the oversold territory, caution is essential. Consequently, a strategic pause for short-term stabilization or a slight uptick may be advisable for traders before they brace for an extended decline. In the interim, the XAU/USD is set to approach immediate support in the $1,860-1,858 range, potentially plummeting further to the $1,820 mark.