Prices rose to $4,472 per troy ounce on Thursday. Despite the modest rally, the precious metal is still trying to recover from a weekly drop of almost 2%.
Pressure on gold continues to mount as expectations grow that major central banks, including the Federal Reserve, may need to maintain tighter monetary policy to combat inflation. Much of this concern stems from the recent rise in energy prices.
An additional negative factor has been the renewed escalation of tensions in the Middle East. The prospects for a short-term deal between the United States and Iran have deteriorated significantly following a new exchange of attacks between the two sides. Bahrain and Kuwait have also become involved in the conflict, marking the most serious escalation since the ceasefire was introduced in early April.
Current tensions and de facto restrictions on shipping through the Strait of Hormuz are keeping oil prices elevated, increasing inflation risks and reinforcing expectations that interest rates will remain high for longer.
Further support for this view came from comments made by Federal Reserve Bank of Cleveland President Beth Hammack. According to Hammack, the Federal Reserve could be forced to raise interest rates again if inflationary pressures continue to intensify.
Investors' attention is now firmly focused on Friday's nonfarm payrolls report. US labor market data could significantly influence expectations for future Federal Reserve policy and, consequently, the outlook for gold.
Technical analysis
On the H4 chart, the market is trading within a consolidation range around the $4,478 level after a retest from below. A downward move towards $4,360 is expected, followed by a corrective bounce towards $4,420. After that, the market may resume its decline towards $4,238, with room for a fresh move to $4,180. The MACD indicator confirms the current bearish momentum, with the signal line below the center line and pointing firmly downwards.
On the H1 chart, the market broke below the USD 4,478 level and moved down towards USD 4,422. A corrective bounce towards $4,478 remains possible as a retest from below before another drop towards $4,250. A further recovery towards $4,390 is possible. The stochastic oscillator supports this scenario, with the signal line below the 80 level and pointing towards 20, indicating persistent bearish pressure.
Conclusion
Gold remains vulnerable to further losses as high energy prices, geopolitical tensions and expectations of tighter monetary policy continue to weigh on sentiment. However, short-term corrective bounces remain possible, especially as investors await key U.S. labor market data that could change expectations for the Federal Reserve.
By RoboForex Analysis Department
Disclaimer: Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
