Anticipated Gold Price Trend: Potential Bearish Correction Before Anticipated Reversal

GOLD PRICE OUTLOOK:

• This week witnessed a 1.55% decline in gold prices, with a momentary dip to levels not seen since early April.
• Despite favorable fundamentals, the ongoing downward correction suggests the possibility of further extension.
• This piece delves into the technical forecast for XAU/USD in the upcoming days and weeks.

Gold (XAU/USD) experienced its second consecutive weekly decline, with prices settling just above the $2,300 mark as the week drew to a close. This decline occurred amidst relatively subdued volatility, despite significant market events such as the Federal Reserve’s midweek monetary policy announcement and the release of the U.S. employment report on Friday.

The retreat in bullion prices surprised many traders, who had expected a stronger response given the decline in U.S. bond yields. These yields fell notably after Federal Reserve Chair Powell dismissed the possibility of rate hikes resuming and hinted at the likelihood of a future cut, despite renewed concerns about inflation. This dovish stance injected optimism into the market, leading to gains in risk assets at the expense of defensive investments.

Even the weaker-than-expected U.S. jobs report, which strengthened expectations for further easing by the Federal Open Market Committee (FOMC), failed to support the price of gold. While traders may find the market’s reaction puzzling, it’s worth noting that the previously dominant inverse relationship between gold and interest rates has significantly weakened this year, with both assets often rising simultaneously.