Market update: gold price steadies after sharp sell-off, new all time high remains possible

Gold's rollercoaster: from record highs to steady state

Last week's rally saw gold reach a fresh record high before a sharp sell-off left the precious metal relatively unchanged over the week. The Federal Reserve hinted that it might cut the Fed Fund rate by 75 basis points this year, consistent with previous communications. Fed Chair Powell's optimistic tone initially drove gold to a new all-time high (ATH) before selling pressure emerged and drove prices down. Following the Bank of England's policy meeting, the US dollar index strengthened, particularly against the Euro and the British Pound, negatively impacting gold as the weekend approached.

USD strength and bond yield movements

As the USD gained strength, US bond yields fell in anticipation of a reduced Fed Fund rate. The rate-sensitive US 2-year yield ended the week about 14 basis points lower, while the benchmark US 10-year yield closed 11 basis points lower. Although a temporarily stronger US dollar may limit gold's upward potential, declining US bond yields could elevate prices and challenge last Thursday’s ATH once more.

Gold technical analysis

Completing a bullish pennant pattern last week, the daily gold chart is now hinting at another bullish setup. The ongoing sideways price movement might evolve into a bullish flag pattern, potentially driving gold prices above $2,200/oz and nearing the ATH of just under $2,225/oz. A reasonable first-line support is observed just below $2,150/oz.

Retail trader data indicates that 50.43% of traders are net-long, with the long-to-short ratio at 1.02 to 1. Traders have maintained a net-long position since 1 March, when gold was trading near $2,082.75, resulting in a 4.24% increase in price since then. The proportion of traders net-long is 11.14% higher than yesterday and 7.51% higher than last week, while the count of traders net-short is 6.18% higher than yesterday and 16.42% lower than last week.

Gold daily chart

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