Will gold prices continue to fall after recent losses?

Gold prices fell sharply on Thursday, extending steep losses from the previous session as the dollar surged. 

A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers, thereby limiting demand. 

“A modest pickup in the US Treasury bond yields assists the US Dollar (USD) to build on the overnight modest bounce from its lowest level since December 10,” Haresh Menghani, editor at FXstreet, said in a report. 

“This, along with a generally positive tone around the equity markets, turns out to be a key factor undermining the precious metal,” he added. 

At the time of writing, the gold April contract on COMEX was at $2,889.51 per ounce, down 1.4% from the previous close. 

Prices had risen to a record high of $2,974 per ounce earlier this month on COMEX.

Gold prices experienced a decline this week due to investors taking profits after recent record highs. 

Despite this, the precious metal’s appeal as a safe haven asset remains strong amidst concerns about potential trade tariffs and a slowdown in the US economy.

These factors contribute to an environment of uncertainty, driving investors towards gold as a way to protect their wealth.

Focus on upcoming data

Market participants are now eagerly awaiting the release of the US Personal Consumption Expenditures (PCE) index, a key measure of inflation, which is scheduled to be published on Friday.

According to a Reuters poll, the PCE index is anticipated to hold steady at 0.3%. 

This data point is of particular significance to investors as it is closely monitored by the Federal Reserve for its policy decisions.

During a speech on Wednesday, Raphael Bostic, the President of the Federal Reserve Bank of Atlanta, expressed his view that the US central bank should maintain the current interest rate levels. 

He believes that these rates are effectively applying downward pressure on inflation, which has seen notable improvement but remains elevated.

Menghani said:

Hence, the focus will remain glued to the release of the US Personal Consumption Expenditures (PCE) Price Index.

Fed rate cuts

Financial markets are currently anticipating that the Federal Reserve will implement a minimum of two interest rate cuts over the course of the current year. 

This prediction is reflected in market pricing, which has already factored in approximately 55 basis points of monetary easing for the year 2025. 

This implies that market participants are expecting a reduction in key interest rates by a total of roughly half a percentage point by the end of the year.

Market participants are also anticipating speeches from various officials later today, which may provide clues into the future direction of US monetary policy.

Gold price: technical analysis

The $2,880 per ounce level appears to be providing some support after selling pressure pushed gold prices below $2,900 an ounce. 

This level was the low on Friday, February 14, when gold had a significant negative session, giving back a fair proportion of the gains made throughout that week. 

It has continued to hold as support since then, according to David Morrison, senior market analyst at Trade Nation.

“But gold remains overbought according to the daily MACD (moving average divergence and convergence), and the indicator is now pointing south suggesting an increase in downside momentum,” he added

Gold will need to fall further to take the MACD towards more neutral levels, and an obvious target is the high hit back at the end of October, just below $2,800.

The MACD can also be reset by a prolonged period of sideways consolidation.

“That can’t be ruled out given the recent steady rally in gold prices. But much will depend on the strength of the buyers’ resolve,” Morrison said. 

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