Gold prices continue to trade lower during Friday's Asian session, hovering near the $4,043 per ounce mark, extending losses from a sharp decline in the previous session. The drop was driven by rising energy costs linked to Middle East tensions, which fueled inflation concerns and strengthened expectations for higher interest rates, denting demand for non-yielding assets.
Spot gold plunged nearly 2% on Thursday, retreating from a two-week high reached the day before. The selloff came as geopolitical risks pushed oil prices higher, leading traders to anticipate tighter monetary policy. Spot gold fell by $80.31, or 1.95%, closing at $4,049.54 an ounce, after touching its highest level since July 7 on Wednesday.
According to technical analysis, gold’s short-term momentum has turned bearish following the sharp drop. The four-hour chart shows that the precious metal is trading below its key moving averages, which now form a layered resistance band. The 100-period simple moving average (SMA) at $4,079.33, the 20-period SMA at $4,081.89, and the 200-period SMA at $4,117.30 are all above the current price, capping any recovery attempts. The Relative Strength Index (RSI) is hovering near 44, while momentum indicators have flattened around the midline, suggesting reduced selling pressure after Thursday's steep correction but no clear reversal signal.
The daily chart also maintains a bearish outlook, with spot gold trading below its critical moving averages. The price remains under the 20-day SMA at $4,070.44, while the 100-day SMA at $4,490.36 and the 200-day SMA at $4,495.63 are well above, indicating that the broader trend remains suppressed. The 14-period momentum indicator is in negative territory, and the RSI is near 45, pointing to ongoing downside pressure rather than a decisive bounce.
On the upside, immediate resistance is seen at the 100-period SMA ($4,079.33), followed closely by the 20-period SMA ($4,081.89). This cluster of moving averages forms a dense resistance zone that bulls must clear to alleviate short-term pressure. Beyond that, the next major resistance sits at the 200-period SMA ($4,117.30), ahead of the weekly high of $4,165. On the downside, support is located at the $4,000 psychological level, followed by the June low of $3,941.
The dollar index rose 0.3% on Thursday, making gold priced in the greenback more expensive for international buyers. Meanwhile, the yield on the 10-year U.S. Treasury note climbed to a more than one-year high, further diminishing the appeal of non-yielding gold. Rising energy prices, particularly Brent crude hitting $100 a barrel for the first time since late May, have exacerbated inflation worries. Analysts noted that higher oil prices boost bond yields, as central banks may be unable to cut rates amid inflation pressures, making gold and silver less attractive to investors.
In the geopolitical sphere, U.S. President Trump issued a severe threat on Thursday against the Houthi militant group, warning of "major military punishment" after the group declared a maritime blockade against Saudi Arabia and opened fire on Saudi vessels in retaliation for an airstrike on Sanaa airport. Trump later stated he was considering launching "unprecedented" large-scale attacks, which further bolstered demand for the dollar and weighed on gold.
Market attention is now turning to the Federal Reserve's upcoming policy meeting. According to the CME FedWatch Tool, traders are pricing in an approximately 83% probability of a rate hike in September, up from 68% on Wednesday. Expectations are that the central bank will keep rates unchanged at the next meeting but may adopt a slightly hawkish tone. Analysts suggest that any dovish surprise could trigger a market reaction.
At 09:03 Beijing time, spot gold was trading at $4,042.75 per ounce.
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