Gold prices continue to face pressure when trading below the 200-day moving average (MA200), in the context of the US labor market maintaining positive momentum and increasing inflationary pressure, strengthening expectations that interest rates will remain at a higher level for longer.
In a newly released report, Mr. Ole Hansen - Commodity Strategy Director at the investment bank of Denmark (Saxo Bank) said that gold losing the MA200 mark is not only technically significant but also reflects changes in market momentum.
Since mid-April, gold has been under more pressure from rising bond yields, a stronger USD and high inflation expectations, causing the supporting role of long-term factors to temporarily weaken.
Although the long-term price increase outlook remains unchanged, the market is currently being affected by another group of factors," he assessed.
According to Saxo Bank experts, the fact that gold prices are maintained below MA200 may cause many investment funds and traders to tend to be more cautious, thereby reducing new buying momentum in the short term.
After losing an important support level, the market is currently shifting its attention to the next support zone around 4,100 - 4,075 USD/ounce. This is considered a noteworthy technical support zone for gold prices after a recent strong correction.
However, Mr. Hansen believes that the current decrease is still just a relative correction in the larger long-term upward trend of gold.
According to Bloomberg data, gold holdings in ETF funds have decreased by about 88 tons since the beginning of the year, while speculative positions in the COMEX gold futures market have also weakened compared to the average for a year.
However, Saxo Bank believes that the fundamental factors supporting gold in the long term have not disappeared, including the need to buy gold from central banks, public debt pressure and the need to diversify global reserve assets.
The missing factor at this time is market momentum. Gold prices need to return to the 4,500 USD/ounce range to regain more positive signals," Hansen said.
