After a sharp drop last weekend, many experts believe that gold prices are still at risk of falling deeper in the short term. However, many opinions also recommend that investors should ignore short-term fluctuations and focus on the long-term outlook for the precious metal.
In a report released on Monday, Mr. Fawad Razaqzada – Market Analyst at FOREX. com said that Friday's sell-off significantly damaged the technical structure of gold after the price broke through the 200-day moving average (MA200).
According to him, if inflationary pressure continues to heat up more than expected, gold can completely test the important psychological support zone of 4,000 USD/ounce this week. He noted that the last time gold broke the MA200 in September 2023, the price fell by about 5% afterwards.
The technical picture has weakened significantly after last week's sell-off. The fact that gold could not maintain its upward momentum above the 4,500 USD/ounce mark makes the market more vulnerable to the risk of deeper correction, while the break below the 200-day moving average has increased the downward momentum," he said.
According to this expert, the next important support zone for gold is around 4,230 USD/ounce - where converges with the long-term uptrend line. If this level is broken, the next support zone will be the bottom of March around 4,100 USD/ounce.
With the current market structure, the scenario of gold falling back to the psychological zone of 4,000 USD/ounce can no longer be ruled out," he said.
Mr. Fawad's forecast was made in the context that the market is turning its attention to the US consumer price index (CPI) report released on Wednesday, with fundamental inflation expected to increase by 2.9% in the past 12 months.
A higher-than-forecast inflation report is likely to strengthen expectations that interest rates will remain high longer, thereby supporting the USD and putting pressure on the precious metal," he added.
Agreeing with this view, Mr. Simon-Peter Massabni - Business Development Director at XS. com said that the short-term outlook for gold is still quite negative as the US labor market maintains good resistance and inflationary pressure continues to increase, thereby creating conditions for higher interest rates and a stronger USD.
In my opinion, the direction of gold in the coming time will still mainly depend on US monetary policy, unless special geopolitical developments appear strong enough to change the balance in the global financial market," he said.
According to Mr. Massabni, the most likely scenario today is that gold continues to fluctuate strongly with a slight downward trend, as long as US bond yields remain at a high level and interest rate cut expectations continue to weaken.
However, he also emphasized that the medium-term upward outlook for gold has not changed significantly.
The diversification of central bank reserves continues, while the demand for buying gold to reduce dependence on the USD is still increasing. In addition, high global public debt, fiscal challenges in major economies and prolonged political instability continue to be long-term supporting factors for gold," he said.
In a share with Kitco News, Mr. Jeff Sarti – Managing Director of Morton Wealth said he was not paying too much attention to short-term gold volatility.
What is more important is whether our long-term investment arguments change or not. The answer is no," he said. "Long-term trends such as excessive fiscal spending, prolonged loose monetary policy and inflationary pressure remain as strong as before.
Looking further into the current fluctuations, Mr. Sarti believes that the lower price range may become an opportunity to buy in for some investors.
If the proportion of gold in the portfolio is still low, then buying to accumulate in parts at the current price range is reasonable, but from a long-term perspective, we still maintain the investment strategy," he said.
