Is buyer confidence in Gold fading as bears loom on the horizon?

Following a robust rally in 2024, gold’s momentum appears to be waning as the U.S. dollar strengthens and economic policies shift, introducing new bearish pressures. 

Initially, gold surged toward the $3,000 resistance level, buoyed by investor demand amid global uncertainties. 

However, renewed interest in the dollar, driven by President Trump’s proposed tax cuts and potential tariffs, has reversed much of this upward momentum, pushing gold prices down to test support near $2,600. 

Softer buyer interest fuels a correction phase

In a recent TradingView post, analyst RLinda noted that buyer momentum has softened, with investors cautious about pushing prices higher in the face of a strengthening dollar and a changing U.S. policy landscape. 

This shift has initiated a correction phase, with gold preparing to retest lower support levels as bearish factors take hold. 

Analysts suggest this trend may persist over the coming weeks, as the market re-evaluates gold’s value amid dollar strength and evolving economic policies.

At the time of RLinda’s analysis, gold was trading around $2,669, with resistance levels near $2,680 and $2,700 and key support at $2,665, $2,652, and $2,637.

Now, with gold currently priced at $2,605, significantly below these support levels, the bearish momentum has strengthened, indicating a deeper correction may be underway as market sentiment shifts more decisively downward.

Reduced rate cut expectations add pressure on Gold prices

Supporting this outlook, Ole Hansen, head of commodity strategy at Saxo Bank, observed on November 11 that gold’s ongoing correction, amid continued dollar strength and rising yields, is bringing the $2,600 level into sharp focus. 

Hansen also points out that market expectations for Federal Reserve rate cuts have shifted, now anticipating fewer than three 25-basis-point reductions by next December, down from eight projected in late September. 

This reduced expectation places additional pressure on gold prices, as rate cuts typically increase interest in precious metals.

“Gold’s ongoing correction amid continued dollar and yield strength is bringing USD 2,600 into focus. In addition, the market is now pricing in fewer than three 25-bps Fed cuts by next December, down from around eight in late September.” – Ole Hansen

Factors behind Gold’s downturn

While global uncertainties would usually bolster safe-haven demand for gold, Trump’s proposed tariffs, including a 10% tariff on all U.S. imports and 60% on Chinese goods, have raised concerns about trade disruptions and inflationary effects. 

Additionally, recent profit-taking by investors, evident in notable outflows from gold-backed ETFs, underscores this shift in sentiment.

For instance, the world’s largest gold-backed ETF, SPDR Gold Shares (GLD), reported its largest weekly outflow in over two years, with $1 billion in funds withdrawn, according to Bloomberg. 

Following the definitive election results, some investors have exited positions to lock in profits as gold’s allure dims in favor of a stronger dollar and rising equities.

With upcoming U.S. economic data likely to influence the Federal Reserve’s rate decisions, further dollar strength could deepen gold’s decline. The focus now turns to whether the metal can sustain support at $2,600 or if mounting bearish factors will drive prices lower. 

As buyer confidence ebbs, the gold market appears to be tilting toward the bears, with macroeconomic indicators casting doubt on its short-term prospects.

For traders, monitoring support around $2,600 and the upcoming CPI release will be crucial for gauging gold’s next move.

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