Gold Selling Pressure in Place

The price of gold continued its downward trend since the beginning of trading this week, in addition to the turmoil in the bond market. According to the performance, the price of XAU/USD gold fell to the support level of 1885 dollars an ounce, its lowest since mid-March. The price of gold declined by more than 9.3% from its highest level this year. Yesterday, it tried to recover amid the stoppage of the dollar’s gains, but the gold price’s gains did not exceed the resistance level of $1905 an ounce. It returned on the downward path again, reaching the support level of $1898 an ounce, at the beginning of Wednesday’s session.

• The price of gold has come under severe pressure in the past few months even as the challenges in the bond market continue.
• Bond yields, which move inversely to prices, jumped to their highest level in more than a decade.
• According to performance, the yield on US Treasury bonds for 10 years rose to 4.346%, the highest level since 2007, as investors expected the Federal Reserve to continue raising US interest rates.
• The yield on the 30-year bond jumped to the highest level since 2012.

It is worth noting that the price of gold is facing difficulties even after some important news about the US economy. While the country’s budget deficit is rising to all-time highs, some of the major buyers of US debt are starting to cut back on their stake. In this regard, China, the second largest holder of US debt, reduced its share to its lowest level in more than 14 years. It now holds about $850 billion in US debt, down from an all-time high of over $1.2 trillion.

Saudi Arabia also dumped US Treasury bonds. It sold more than $3 billion worth of bonds in July, the third month in a row. It now owns $108 billion. And these countries are now moving that money into other assets, including gold. Other notable buyers of gold are the central banks of Türkiye and India.

Governments are increasingly concerned about the United States as geopolitical risks rise. For example, there are fears that the United States may freeze its funds as it did with Russia at the beginning of the war in Ukraine. Moreover, they were dismayed by the recent decision by Fitch Ratings to downgrade the credit rating of the United States from AAA to AA-. US debt has jumped sharply in the past few years and analysts expect the situation to get worse. All of these factors are positive for the gold market, which is seen as a safe haven.

The daily chart below shows that the XAU/USD gold price has been sold off in the past few months. It has now surpassed the important support level at $1957 an ounce, the high of February 3rd. It also moved below the important 50-day moving average and the critical support at $1892. Accordingly, the Relative Strength Index (RSI) and the Stochastic Oscillator have drifted lower. Therefore, the outlook for gold price is bearish, with the next important support level at $1800. But in the long run, the price of gold is likely to bounce back as demand from global central banks to buy gold picks up.

The gold price will remain under pressure until the US dollar and global markets react to the statements of global central bank officials led by the US Federal Reserve, which sponsors the Jackson Hole Symposium at the end of the week.

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