Gold's Rally Takes a Breather

Gold has been trading in a strong up trend since November 2022 with recent price action rising to $2,085, re-visiting its all-time high. A sharp pull back unfolded over the past two weeks while the U.S. dollar has been rising concurrently.

The dollar strength has been a component to the fall in gold; however, the decline is not isolated to just dollar strength. Profit-taking and the rebound in U.S. Treasury yields were also major contributors. All of these factors are likely to be a short-term obstacle while the long-term outlook for the precious metal continues to remain bullish.

Global interest rates are already or close to peak levels, while inflation has been decelerating and the U.S. dollar has been drifting lower over the past six months, which has been the reason for the recent rally to a new all-time high.

Source: Tradingview

On Thursday the price of gold broke below its minor support of $1,970 which suggests that further fall to $1,950 is on the cards. A break below minor support of $1,950 would signal an extension of the current pullback in the near-term with strong support seen at the 38.2% Fibonacci retracement ratio which crosses at $1,907.

Global demand concerns have deteriorated sentiment towards commodities in general in recent times. However, strong demand and limited supply growth are likely to support prices in the long-term.

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