Gold prices are currently trading near a key support level, with short-term factors pointing to a high probability of breaching this threshold and diving even deeper. For now, a downside move looks more likely than a rebound and the subsequent rally.
Why is gold struggling? The answer remains the same: geopolitical tensions between the United States and Iran. The atmosphere in the region is still explosive, and peace negotiations have yet to gain real traction. This environment is quite favorable for the energy market, pushing crude prices higher. Last week, minutes from the latest Federal Reserve (Fed) meeting were released, revealing that many policymakers are open to the idea of rate hikes in case of painful inflation spikes driven by the energy shock. Their hawkish posture makes the odds of monetary easing slimmer, supporting the dollar and depriving gold of its near-term appeal.
But let’s put the gloomy picture behind us and focus on a brighter fundamental background. Central banks are not tired of increasing their gold reserves to diversify away from the greenback. Despite the precious metal’s current pullback from all-time highs, its long-term outlook remains optimistic. The rally will return—there's little doubt about that. But in the short run, from a technical perspective, prices are now testing the $4,375 support level. Once this threshold is breached, the path toward the next significant target of $4,000 will open.
The final recommendation:
— Sell gold at the current price, aiming for $4,000 per troy ounce within one month.
— Place Stop Loss at around $4,590, just above resistance, to manage risks if the market plays against us.
This content is for informational purposes only and is not intended to be investing advice.
