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Market Analysis

Gold Prices Dip Despite Central Bank Demand; Risk Appetite Prevails
Amos Simanungkalit · 117.9K Views

Gold (XAU/USD) prices dipped into the $2,310s on Tuesday amidst a prevailing risk-on sentiment in the markets, which typically diminishes demand for safe-haven assets like gold. Despite expectations from a World Gold Council (WGC) survey indicating strong future demand in 2024, the precious metal faced downward pressure.

 

The decline in gold prices coincided with a broader preference for riskier assets, evident as US stock indexes reached new highs driven by tech stock rallies on Monday. This positive market sentiment extended into the Asian session with gains across major bourses in the region.

 

Market analysts anticipate a potential 0.25% reduction in the US Federal Reserve's Fed Funds Rate by September, currently estimated with about a 55% probability. This outlook contrasts with the Fed's recent upward revision of future interest rate projections, which typically undermines the appeal of non-yielding assets like gold.

 

According to the WGC's "2024 Central Banks Gold Reserves Survey," central banks are expected to continue robust gold purchases. The survey revealed that 81% of respondents foresee an increase in overall central bank gold reserves in 2024, marking a significant rise from previous years. Factors driving this trend include gold's role as a long-term store of value and hedge against inflation, cited by 42% of respondents as highly influential in their decision-making.

 

 

Technically, gold's daily chart indicates the formation of a bearish Head-and-Shoulders (H&S) pattern, typically signaling a potential trend reversal. The pattern, with its neckline around the $2,279 support level, suggests downside targets at $2,171 and potentially $2,106 upon a decisive break below this level. Conversely, a move above $2,345 would invalidate the H&S pattern, possibly signaling a continuation towards $2,450.

 

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Overall, while central bank demand remains supportive, gold prices face immediate pressures from upbeat market sentiment and interest rate expectations.

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.

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