Double pressure from technology stocks and technical indicators
Although the precious metal has just gone through turbulent weeks and recorded a decrease of nearly 10% before rebounding, the market has not yet been able to establish a clear recovery trend.
On the morning of June 29 - Vietnam time, world gold prices traded around the threshold of 4,060.1 USD/ounce (down 0.68%) compared to the previous day. Thus, the precious metal cannot maintain a stable upward momentum above the 5-day moving average since mid-June.
Assessing the cause of the current decline, Mr. Marc Chandler, Managing Director at Bannockburn Global Forex, pointed out a major obstacle being underestimated by the market, which is the wave of liquidating a series of technology stocks.
This expert emphasized that the correlation between changes on the Nasdaq exchange and gold prices is reaching approximately 0.72 in the past 30 days, recording the highest level in nearly two decades.
In addition, China's moves to tighten the "paper gold" market also contribute to creating significant pressure, despite the retreat of treasury bond yields and continuous buying pressure from central banks still playing a fundamental supporting role.
From a technical analysis perspective, the picture of precious metals is also facing many challenges. Mr. Alex Kuptsikevich, senior market analyst at FxPro, has warned about the emergence of the "death cross" model that is becoming apparent as the 50-day moving average line cuts below the 200-day line.
This expert believes that gold is on a fourth consecutive week downward trend due to market expectations adjusted for two important interest rate hikes by the US Federal Reserve (Fed) this year. Notably, Mr. Kuptsikevich also noted that the context governing gold price fluctuations has completely changed.
Instead of the traditional inverse correlation between oil and gold that was clearly seen in previous geopolitical tensions, both types of assets are currently showing a trend of retreating together.
Geopolitics cools down triggers wave of profit-taking
Going deeper into macroeconomic factors, analysts at CPM Group have officially issued a Selling recommendation for gold, accompanied by a price reduction target of 3,800 USD/ounce and a cut-loss level set at 4,125 USD/ounce.
According to the organization's report, the sell-off wave stems from investors massively taking profits as the global economic and political environment begins to show signs of cooling down after a long series of negative news.
The stock market is operating well and US economic data is showing stronger than expected, prompting cash flow to shift to risky investment channels. Along with that, oil prices also fell as supply through the Strait of Hormuz improved.
In geopolitics, expectations of a ceasefire in the confrontation between the US and Iran, along with the new situation on the Ukrainian battlefield, have eased investors' psychology of seeking safe haven assets.
According to CPM Group, although long-term risks are still latent and the market can always be shaken by unexpected news, the current short-term outlook has become much less harsh.
Opportunities appear behind the "short-term decline, long-term increase" cycle?
Despite the gloomy forecasts surrounding the coming weeks, some experts still maintain an optimistic view of the medium and long-term outlook. Mr. Sean Lusk - Co-Director of Trade Risk Prevention at Walsh Trading, believes that the least resistant path currently is that the USD will tend to increase higher, thereby curbing speculative buying of precious metals. However, this decline is actually a huge buying opportunity.
The expert predicts that if positive economic data in the next few weeks continues to push the market down, gold prices may reach a potential bottom at 3,700 - 3,800 USD/ounce, while silver prices may fall to the historical resistance level of 50 USD/ounce before rebounding strongly again.
Mr. Lusk also placed a lot of faith in the bullish seasonal cycle that usually appears in the second half of July, and expected inflation to ease as falling energy prices begin to penetrate the global supply chain.
Agreeing with this positive view, expert Michael Moor, Founder of Moor Analytics, is completely confident that gold prices will soon regain momentum and climb back in the near future.
