In today’s trading session, gold continued its recent decline, dropping 1% to reach $2,300. Earlier in the month, the precious metal approached the $2,400 level but did not maintain it at the close of the day. This decline appears tied to a reduction in geopolitical tensions, which previously had driven investors towards the safety of gold.
Yesterday we also discussed how the rise in benchmark 10-year U.S. Treasury yields illustrates the traditional inverse relationship between yields and gold prices.
Historically, when yields climb, the opportunity cost of holding non-yielding assets like gold increases, steering investors towards assets that generate returns. This trend can be observed in more recent economic cycles, such as during the aftermath of the 2008 financial crisis.
As the economy stabilised and interest rates began to rise from their historic lows around 2015, gold prices experienced volatility, reflecting shifts in investor preference towards yield-bearing assets.
Over the last two months, gold increased by over 20%, but this rapid rise is now facing a corrective phase. Recent trading sessions suggest a shift, with gold beginning to trend downwards. This correction aligns with typical market behaviors observed when an asset moves up quickly.
Technically, the situation looks set to possibly extend this decline. According to Fibonacci retracement analysis, gold could find temporary support around $2,260, which marks the 38.2% retracement level. A break below this could lead the prices towards the $2,200 area.
Despite the retreat, the underlying factors that previously propelled gold upward—such as market uncertainties—still exist. This suggests that the current dip could be seen as an opportunity to buy at a lower price before any potential future increases.
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