The recent comments from the Federal Reserve had a significant impact on the gold market, leading to a 3% increase initially. However, the dollar’s recovery later in the day caused this gain to dwindle to just 0.5%. This volatility in the market showcases the uncertainty and unpredictability that investors are currently facing.
While the technical outlook for gold remains unclear, the fundamental factors are still tilted in favor of the bulls. The price of gold slipped to $2222 in early trading on Thursday due to low liquidity and triggered stop orders, resulting in the elimination of short positions. Despite this, many investors saw a stabilisation above $2200 as an opportunity to capitalize on their gains.
The technical analysis of gold presents a mixed picture on daily timeframes. On the bullish side, the ability of gold to surpass previous highs validates the Fibonacci extension scenario, projecting a target of 2300. Additionally, the ability to reach new highs after a consolidation phase is seen as a positive signal. However, on the bearish side, signs of fatigue are starting to show as the price highs were not confirmed by the RSI. Furthermore, the RSI dropped out of the overbought territory, indicating a potential pullback.
Traders are closely monitoring the $2155-2190 price range for a potential break, as this could signal further movement in the market. Despite the recent setbacks, the overall sentiment remains optimistic as speculation mounts that other central banks will adopt looser monetary policies than the Federal Reserve. This environment could be beneficial for risk assets, including gold.
Although gold has experienced a remarkable rally in recent weeks, the market appears to be overheated, necessitating a pause to allow for a more sustainable uptrend. While the short-term fluctuations may be unsettling, investors should focus on the long-term fundamentals of gold and its role as a safe-haven asset in times of economic uncertainty. By carefully navigating through the volatility, investors can find stability and potential opportunities in the gold market.
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