Gold prices extended their decline during Asian trading hours on Thursday, with spot gold currently hovering around $3,977 per ounce.
Investors are focusing on the US PCE price index data scheduled for release today, which is expected to trigger significant market movements.
Spot gold prices fell sharply on Wednesday, dropping below the key $4,000 per ounce level to hit their lowest point in over seven months.
The decline was primarily driven by a strengthening US dollar, fueled by rising expectations for Federal Reserve interest rate hikes, which weighed on the dollar-denominated precious metal.
Market attention has now shifted to upcoming US economic indicators, with the release of the May Personal Consumption Expenditures price index on Thursday.
The annual inflation rate as measured by the PCE is forecast to rise to 4.1%, up from 3.8% in April.
A reading above expectations could increase the likelihood of further US rate increases, providing additional support for the US dollar.
Since gold does not yield interest, higher rates tend to diminish its appeal to investors.
Analysts note that gold remains vulnerable to further downside risks if the Federal Reserve signals a more hawkish stance or if incoming economic data supports the case for additional tightening.
Technical Analysis of Gold
The short-term outlook for gold appears bearish.
On the four-hour chart, the price remains well below key moving averages which are acting as strong resistance levels, including the 20-period Simple Moving Average at $4,124.98, the 100-period SMA at $4,268.32, and the 200-period SMA at $4,413.03.
The bearish momentum is further supported by technical indicators, with the 14-period momentum indicator deeply entrenched in negative territory and the Relative Strength Index hovering near the 30 level, showing no signs of exhaustion in the downward move.
The daily chart also shows a continuation of the downtrend, with the price trading below all major moving averages, maintaining a bearish tone.
Gold is positioned significantly below the 20-day SMA at $4,296 and the 200-day SMA at $4,473, while the 100-day SMA around $4,700 provides additional overhead resistance.
These levels collectively indicate sustained selling pressure rather than a market that has found a bottom.
Momentum indicators remain firmly negative, with the RSI around 31, suggesting room for further weakness before any significant recovery attempt materializes.
On the upside, initial resistance is seen near the 20-period SMA around $4,124.98, where any corrective rebound is likely to encounter selling pressure.
A decisive break above this level could see the price target the 100-period SMA around $4,268.32, which coincides with nearby resistance from the 20-day SMA.
Immediate support is provided by the recent lows, with a potential move towards the $3,900 per ounce level if selling pressure persists.
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