Gold Price Analysis: XAU/USD Tests Recent Lows Amid Geopolitical Concerns

Gold Price Analysis: XAU/USD Tests Recent Lows Amid Geopolitical Concerns

Introduction:

Gold faces a critical juncture as it tests recent lows, even in the midst of ongoing geopolitical tensions in the Red Sea. Despite operational fears leading to the suspension of shipping by Chinese state-owned company Cosco and the avoidance of Red Sea routes by Danish shipping giant Maersk, gold's response has been influenced by various factors.

Impact of US Jobs Data and Volatility:

Last Friday's US jobs data triggered significant volatility in the gold market. The higher-than-expected US NFP report led to a strengthening US dollar, as rate expectations were adjusted. However, subsequent disappointment in the US ISM Services report, with a fall in the Services PMI and a sharp contraction in the Employment reading, added complexity to the market dynamics.

Upcoming US Inflation Reading:

This week, investors are closely watching the latest US inflation reading scheduled for Thursday. Projections indicate a drop in core inflation year-on-year to 3.8% from 4.0%, while headline inflation is expected to increase slightly to 3.2%. These figures hold potential implications for gold's future trajectory.

Technical Analysis and Support Levels:

Gold has been on a downward trend this year, marked by lower highs and lower lows. Currently trading below the 20-day simple moving average and a prior horizontal support at $2,032/oz, the precious metal faces a pivotal moment. The next support levels lie at $2,014/oz (50-day simple moving average) and a prior swing high at $2,009/oz. A potential upside break could bring $2,043/oz (20-day simple moving average and prior horizontal resistance) into focus.

Retail Trader Sentiment:

Retail trader data indicates a net-long sentiment of 59.29%, with a long-to-short ratio of 1.46 to 1. The increase in net-long traders suggests a potential continuation of gold price decline, aligning with a contrarian view to crowd sentiment.

Conclusion:

As gold grapples with geopolitical tensions and economic data releases, the charts and sentiment analysis provide valuable insights for traders. Key support and resistance levels should be closely monitored as gold responds to evolving market dynamics.