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MENAFN- Daily Forex)
Throughout last week's trading, gold prices have been struggling to recover from their recent losses, which reached the support level of $2,286 per ounce. Recently, gold faced strong selling pressure due to China's announcement of suspending its record gold buying pace and the strength of the US dollar, which negatively impacts gold. Furthermore, gold's rebound attempts last week reached $2,336 per ounce before settling around $2,328 per ounce at the start of trading this week.
According to gold trading companies' platforms, the price of gold has generally drifted sideways for two months now, consolidating at high levels. Greatly, this lack of progress has eroded sentiment, drained greed, and fueled bearish sentiment. Thus, this healthy process is exactly what the price of gold needs to rebalance sentiment. After rising to extreme overbought levels in April, greed has grown excessively. The high consolidation since then has drained that, setting the gold price up for another rally.
From mid-February to mid-April, gold prices surged sharply by 20.0% in a remarkable rally. No less than 19 entirely new nominal closes were achieved during that short period, which really excited traders! The lion's share of this upward trend was not supported by the usual fundamental drivers for gold, speculators buying gold futures contracts, and US equity investors buying gold ETF shares. Chinese investors and central banks took the lead.
Meanwhile, since hitting a stunning record high in mid-April at $2,388, gold has mostly fallen sideways. The pullback first came in late April, sending gold down 4.0%. The yellow metal then reversed higher in a nice rally in mid-May, sending it up 5.8% to $2,424. But that renewed momentum quickly stalled, and gold fell another 5.7% to $2,286 in early June. Overall, since mid-April, gold has fallen 2.7% as of midweek.
This recent drift has formed a trading range that has mostly been between $2,300 and $2,400. Sideways movement is the technical definition of consolidation, and this is certainly a high definition. Although these levels have started to look normal over the past few months, it was not until early March that gold was seen above $2,100! Ultimately, the hold here is truly impressive from a technical standpoint, especially after the rally to extremely overbought levels.
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Gold Price Forecast and Analysis Today:
Based on the daily chart above, gold is still in a bearish bias and a move below $2,300 per ounce supports bear control and signals a downward move ahead. If that happens, the next major support levels could be $2,285 and $2,255 per ounce. Technically, we still prefer to buy gold from any lower level as geopolitical tensions could provide positive momentum for gold to move higher. Overall, the large gold purchases by Chinese investors and central banks are likely to continue, and the driving factors are not going away. Moreover, the serious secular decline in Chinese stock markets and the relentless US government inflating the purchasing power of the dollar. Gold futures speculators have a lot of levels to buy, especially on the long side, which is larger than the shorts.
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