Gold prices have fallen from a high of $2,800 an ounce two weeks ago to more than $2,500 this week, raising concerns among investors about the impact of the slide in the near term. Despite reassurances that the long-term positives remain, investors are concerned as the decline continues.
Sharp decline and technical reasons
FxPro analyst Alex Kuptsikevich noted that gold prices fell 5% this week, the biggest weekly decline in three years, noting that the metal has lost $250 of its value since the peak, or 9%.
He explained that this sharp decline is an expected correction given the rise that gold has witnessed since last October, adding that the price may drop to $2,400 soon, which represents a return to the 200-day average.
He added that technical signals show a change in momentum, with the RSI falling from levels above 80, an indicator that often signals a trend reversal at extreme levels. He pointed out that similar experiences in 2009 and 2011 resulted in initial losses of 15% and 20%, respectively.
Economic factors and the impact of the dollar
Naeem Aslam , Chief Investment Officer at Zaye Capital Markets , stated that the strength of the dollar and changing expectations regarding the Federal Reserve’s policy have negatively affected gold prices. However, he noted that gold could see a positive correction if these factors change.
He noted that gold could regain its safe-haven appeal if geopolitical tensions escalate or economic uncertainty increases. Continued high inflation could prompt the Federal Reserve to change its monetary policy, which could support gold prices.
Economic data and forecast table
Next week will feature light economic data with a focus on the US housing sector, with October construction starts and building permits due on Tuesday, mortgage applications on Wednesday, and existing home sales on Thursday.
Investors are also awaiting speeches from central bankers, including Goolsbee on Monday and Thursday, for more on monetary policy directions.
