Gold's six-month uptrend is under threat as prices test 3250 level

Gold's six-month rally faces renewed pressure as prices plummet nearly 3% this week, threatening to break the upward trajectory. On Friday, sellers began testing the trend line near the 3250 level, but their initial push was resisted. At the start of today's trading session, an attempt to see prices rebound can be observed. However, gold currently has support only from its technical chart, while the fundamental picture suggests another price decline toward the 3250 mark.

The weakening demand for gold is a direct consequence of reduced geopolitical tensions. A truce in the Middle East has boosted investor interest in riskier assets, leading the S&P 500 index to a new all-time high. Meanwhile, there has recently been a noticeable increase in trading activity in other precious metals, including silver, platinum, and palladium. While gold remains less than 6% below its April peak despite the recent correction, other metals show significantly greater potential to reach their own highs.

FXEmpire analysts also cite the Personal Consumption Expenditures (PCE) price index data, released on Friday, as another factor in gold's diminishing appeal. Both the headline and core inflation indicators rose in May, remaining above the Fed's 2% target. Consequently, the probability of an interest rate cut in July remains around 20%. Although pressure on Fed officials from Donald Trump is increasing, stronger evidence is needed to justify an easing of monetary policy.

According to a survey of traders conducted by Kitco News, gold market activity is expected to be sluggish in the coming days. The trading week in the United States will be shortened by the Independence Day holiday on July 4, and international investors often scale back activity during such periods. A surge in volatility is more likely next week, coinciding with the July 9 deadline for Trump's trade agreement. Until then, gold prices may continue to test the 3250 level.

As long as the price remains below the 3350 mark, bears have a strong opportunity for a new downward push toward the 3250 level.

Consider the following trading strategy:

Sell gold at the current price. Take profit — 3250. Stop loss — 3350.