Gold’s Struggle: Bearish Indications Amid Geopolitical Tensions and Economic Concerns

In Monday’s Asian trading session, the GOLD price showed a downward inclination, sinking to its lowest since July 7 at the $1,911-$1,910 bracket. This decrease, while notable, did not propel further selling actions, signaling bearish traders to tread with caution before fully committing to an extended downside momentum that has been observed over the previous weeks.

Driving this trend, the US Dollar has surged to a six-week high, catalyzed by the Federal Reserve’s anticipated tightening stance. This policy direction is substantiated by recent data, such as the US Producer Price Index (PPI) for July, which exceeded market predictions. According to the US Bureau of Labor Statistics, the PPI for final demand witnessed a year-on-year increase of 0.8%, a sharp escalation from June’s stagnant performance.

This rise in the PPI, paired with a modest uptick in consumer prices in July, underscores the challenges faced in achieving the Fed’s 2% inflation target. Such data sustains the possibility of another 25 basis points hike in the Federal Reserve’s rates by year’s end, bolstering the US Treasury bond yields. This bond performance strengthens the Dollar and in response, places a downward strain on gold prices denominated in the US currency.

Nevertheless, deteriorating economic conditions in China, combined with mounting geopolitical tensions, might provide some buffer to the safe-haven appeal of GOLD , potentially limiting further declines. A recent event to note involves a Russian warship firing warning shots at a cargo vessel in the Black Sea. This incident follows Russia’s decision in July to withdraw from a pivotal UN-brokered agreement that facilitated Ukraine’s agricultural exports through the Black Sea.

Given these dynamics, the fundamental environment leans decidedly towards a bearish sentiment for gold. This suggests that any recuperative price movement may be temporary and could retract promptly. With Monday’s economic calendar devoid of significant data, the Dollar’s performance will likely dictate short-term trading opportunities for gold.

Technical Analysis of Gold

Currently, GOLD is trading near the $1,910 mark, coinciding with the 61.8% Fibonacci retracement from late February to early May’s rise. The bearish outlook is bolstered by gold’s decisive break below the upward support line from February, now pivoting around $1,925.

Bearish momentum is further highlighted by the Moving Average Convergence and Divergence (MACD) indicator, suggesting potential further retreats in the commodity’s price.

Interestingly, the Relative Strength Index (RSI), currently at 14, sits beneath the 50.0 mark, hinting at potential bottoming out for gold, emphasizing the 200-DMA support close to $1,900.

Should gold breach this 200-DMA support and sustain below the $1,900 mark, there’s a plausible scenario where it could further descend to March’s high near $1,858.

Conversely, if there’s a daily close beyond the current support-turned-resistance, approximately $1,925, the next target lies at the $1,941 resistance, where the 50-DMA and 50% Fibonacci retracement converge.

Subsequent to that level, the descending resistance line from early May, presently near $1,955, will serve as the last barrier for those bearish on gold.