Gold sold off on Tuesday following the hot US CPI report as it lifted real yields and triggered a strong rally in the US Dollar. The market continues to trim rate cuts expectations as the economic data keeps on surprising to the upside. In the big picture, Gold should be supported by the expectations of a rate cut cycle, but it will need the short term picture to align or we will continue to see the market remaining under pressure.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that Gold has broken below the key support level at $1800. This level has held as strong support for the past few weeks, but the strong move to the downside on Tuesday has invalidated this level. The next key support level to watch is at $1750, where we could see some consolidation before the next move.
In terms of indicators, the RSI is now in oversold territory, which could suggest that we might see a short-term bounce in the price. However, the MACD is still showing a bearish signal, indicating that the momentum is still to the downside.
Overall, the technical picture for Gold remains bearish in the short term, with $1750 being the next key support level to watch. If this level is broken, we could see a further move to the downside towards $1700.
How does this affect me?
For individual investors who hold Gold in their portfolios, the recent sell-off could be concerning. It might be a good time to reassess the allocation to Gold and consider diversifying into other assets to mitigate the risk of further downside in the price.
How does this affect the world?
The sell-off in Gold could have broader implications for the global economy. Gold is often seen as a safe-haven asset in times of economic uncertainty, so a sharp decline in its price could indicate that investors are becoming more optimistic about the economic outlook. This could potentially lead to increased risk appetite in the markets and drive investments into riskier assets.
Conclusion
In conclusion, the sell-off in Gold following the US CPI report is a reflection of the market’s expectations for the future direction of interest rates. While the technical picture remains bearish in the short term, the longer-term outlook for Gold remains supported by expectations of a rate cut cycle. Investors should closely monitor key support levels and indicators to assess the future direction of Gold prices.
