Gold prices are experiencing significant selling pressure, marking what analysts describe as some of the worst performances in recent years. The downturn is fueled by a complex interplay of factors, including persistent inflation concerns, expectations of prolonged higher interest rates, and geopolitical tensions. Investors are closely watching key levels as the precious metal navigates a volatile market.
The recent decline in gold’s value comes despite ongoing global uncertainties, such as escalating tensions in the US-Israel-Iran conflict, which briefly pushed crude oil prices above $100 a barrel. While easing oil prices offered a temporary reprieve, a shift in market expectations away from anticipated interest rate cuts has limited any potential upside for gold. This week, preliminary PMI reports from major economies will be a key focus for traders.
According to Manav Modi, Senior Analyst, Commodity Research at Motilal Oswal Financial Services Ltd., gold is likely to continue facing downward pressure this week. “Gold is seeing intense selling pressure and this is likely to continue this week amid global tensions,” Modi stated. The technical outlook further supports this bearish sentiment, with gold prices breaking down from a recent consolidation range.
Technical Analysis: A Bearish Structure
Gold has turned technically weak after a sharp breakdown from its recent consolidation range. Prices have fallen below the middle Bollinger Band (20 Simple Moving Average or SMA), signaling a loss of bullish momentum and approaching the lower band, which suggests increased downside volatility. This price action resembles a “distribution top” followed by a breakdown, confirming a short-term bearish structure, according to analysis of recent market trends.
Currently, immediate resistance is seen between Rs 142,000 and Rs 145,000, aligning with the middle Bollinger Band and a prior support zone. A stronger resistance level lies at Rs 150,000, where previous attempts to break through have been unsuccessful. On the downside, key support is established around Rs 136,000. A decisive breach of this level could trigger a further decline towards Rs 130,000 – Rs 128,000.
Factors Influencing the Decline
The decline in gold prices is not occurring in isolation. Central banks globally are adopting cautious monetary policies. The U.S. Federal Reserve has held rates steady while signaling continued inflation risks, while the Reserve Bank of Australia (RBA) has been raising rates. A stronger U.S. Dollar and rising bond yields are also contributing to the downward pressure on bullion. Geopolitical tensions, while initially boosting gold as a safe haven, have not been enough to offset these broader economic forces.
Volume expansion during the recent decline indicates strong selling pressure in the market. Unless gold prices can quickly reclaim the Rs 145,000 level, the prevailing bias remains to sell on any upward price movements throughout the week.
Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
Looking ahead, market participants will be closely monitoring the preliminary PMI reports from major economies for further clues about the global economic outlook and potential impacts on gold prices. The coming days will be crucial in determining whether gold can stabilize or if further declines are on the horizon.
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