Gold’s rebound continued for the fourth consecutive session, with prices remaining above $2,000 per ounce. According to Justin Low, a currency analyst at ForexLive, gold may experience a significant correction before making new highs.
Low explained that the rebound in gold is due to the dollar sagging slightly, driving gold prices up by 0.4% to $2,026 and erasing its post-CPI drop. Last week, buyers successfully defended the 100-day moving average, propelling gold back above $2,000 per ounce. Low pointed out that gold is now just down 0.6% on the month, showing resilience despite market volatility.
The surge in gold’s price at the start of the year reflects the big swings in market odds on central bank rate cuts pricing. As things settle down and traders readjust, gold is still finding support. Low emphasized that the ongoing support for gold, even after the Fed’s reaffirmation of higher-for-longer rate policy stance, is a positive sign for the precious metal in the bigger picture. However, he expressed concerns from a technical standpoint, noting a potential pattern showing lower highs and lower lows.
According to Low, chartists have been experiencing a textbook trade with the rebound off the 100-day moving average, but there is a potential pattern forming that could result in a correction for gold before a major breakout to $2,100 and beyond. He believes that for the time being, gold’s upside momentum might be capped closer to the trendline resistance near $2,053.
At the time of writing, spot gold last traded at $2,027.49 per ounce, up 0.47% for the day. This price movement indicates that the correction Low predicted may be on the horizon.
Insight: Despite gold’s recent rebound and resilience, there are technical indicators pointing to a potential correction in the precious metal’s price. Investors should be cognizant of these patterns and factors that could influence the market before making any significant moves in commodities or securities.
