Gold prices continued to break through strongly in the first session of the week as buying power returned to the market, helping the precious metal record an increase of more than 3% - the strongest since the beginning of February. However, many experts believe that the current recovery is still not enough to confirm a sustainable upward trend.
Spot gold prices at one point reached 4,351 USD/ounce in the North American trading session, recovering significantly compared to the bottom around 4,000 USD/ounce set last week.
The main driving force supporting gold came from the drop in oil prices, thereby reducing inflationary pressure and concerns related to interest rate prospects. At the same time, improved market sentiment also contributed to promoting cash flow back to the precious metal group.
However, Ms. Michele Schneider - Chief Strategy Officer at MarketGauge believes that it is too early to confirm that gold has officially bottomed out.
According to Kitco News, Ms. Schneider said that the sharp decline on June 11 may be an important turning point for the market, but gold still needs more clear confirmation signals.
That trading session may be an important reversal point, but we still have no confirmation signal," she said.
According to Ms. Schneider, the fact that gold maintains a psychological support zone around 4,000 USD/ounce is a positive sign and long-term investors may start disbursing partially. However, to confirm the bottom zone, the market needs to see continuous buying power instead of just a short-term technical recovery.
Ideally, gold prices need to enter a stable accumulation phase or close above the previous session's peak with a large trading volume, thereby showing that new cash flow is really returning.
“The fact that gold is maintained above the 4,000 USD/ounce range is a noteworthy sign. However, I want to see the price return above the 200-day moving average, currently around 4,450 USD/ounce," she said.
From a technical perspective, Mr. David Morrison - Senior Market Analyst at Trade Nation also assessed that gold has passed the first test by successfully defending the important psychological support level.
However, he warned that the market may still experience strong fluctuations in the coming days.
If unfavorable factors appear that cause investor sentiment to change, the $4,000/ounce mark could completely be re-tested" - he said.
Besides technical factors, the monetary policy outlook of the US Federal Reserve (Fed) continues to be an important variable for the gold market.
Mr. Nick Cawley - Analyst at Solomon Global - said that investors are waiting for more signals from the Fed about interest rate prospects. If the Fed sends a softer message with inflation and interest rates, gold may receive more support.
However, from a technical perspective, Mr. Cawley believes that gold still has to overcome many important resistance levels before confirming a new upward trend. The first resistance level lies at the 50-day moving average around 4,581 USD/ounce, followed by the 4,773 USD/ounce zone – a low peak set in May.
Overcoming these thresholds will open up opportunities for a more sustainable price increase," he said.
Notably, Ms. Michele Schneider believes that silver may be a more observable metal in assessing the next trend of the entire group of precious metals.
While gold has lost many important technical support levels such as the 50-day, 200-day and 50-week moving average, silver still shows better resistance when holding the 50-week moving average over a long timeframe.
According to her, if silver continues to outperform gold, this may be a signal that inflation expectations are returning. At the same time, with its increasing role in the fields of technology, artificial intelligence (AI), solar energy and industrial production, silver still possesses a fairly solid long-term demand foundation.
Meanwhile, experts at TD Securities believe that although the long-term outlook for gold and silver is still positive, the market still needs to closely monitor energy price movements because this is a factor that greatly affects inflation expectations and monetary policy orientation.
Experts from Société Générale also warn that high real yields are still limiting the attractiveness of gold in the short term.
Although maintaining a cautious view on the immediate developments, most experts believe that the fundamental factors supporting precious metals in the long term have not changed, from the central bank's gold buying demand, the trend of diversifying reserve assets to the risk of prolonged inflation.
I think the foundational factors supporting precious metals are even clearer now than before," Ms. Schneider said.
However, for short-term investors, she recommends patiently waiting for technical confirmation signals instead of trying to bottom-fish too early.
Instead of bottom-fishing, I will wait for confirmation signals and then disburse portions" - she concluded.
