It seems as though gold traders were taking a bit of a breather on Thursday, snapping a three-day uptrend.
Experts believe that gold is not yet at overbought levels, and prices could rise further in the coming weeks, possibly breaching the record high of $2,800 per ounce.
Gold and silver prices were both in the red on Thursday due to a strong dollar and rising bond yields in the US.
A positive tone in equity markets also dented the appeal of precious metals.
A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers.
On the other hand, higher bond yields increase the opportunity cost of holding gold and silver, as they do not yield interest.
At the time of writing, the February gold contract on COMEX was at $2,760.69 per ounce, down 0.4%. The March silver contract was down 0.8% at $31.152 per ounce.
Gold prices pauses before next push higher
Optimism from China surrounding additional supportive measures from local authorities is being offset by US President Donald Trump’s recent tariff plans, which gold traders are still digesting.
Trump intends to use revenue generated from the proposed tariffs to fund government programs and tax cuts.
However, the plan to impose a 25% tariff on Mexico and Canada, and a 10% tariff on China, is expected to encounter opposition from Republicans in Congress.
Haresh Menghani, editor at FXstreet, said in a report:
Uncertainty surrounding US President Donald Trump’s tariff plans, which could trigger trade wars and elevate market volatility, should help limit the downside for the gold price.
Additionally, the recent pullback in gold prices has been limited by renewed optimism stemming from the China Securities Regulatory Commission’s (CSRC) announcement of new supportive measures aimed at bolstering Chinese equity markets.
This development has injected a degree of buoyancy into the gold market, as China holds the position of being the world’s leading consumer of gold.
The CSRC’s intervention and its potential positive ramifications for the Chinese economy have spurred investor confidence, leading to a corresponding uptick in demand for gold as a safe-haven asset.
Consequently, the downward pressure on gold prices has been mitigated, as market participants weigh the potential benefits of the CSRC’s measures against other prevailing economic factors.
Gold price: technical forecast
“The daily MACD shows that momentum continues to point upwards, and while stretching further into positive territory, it is not yet at overbought levels,” David Morrison, senior market analyst at Trade Nation, said.
According to FXstreet, gold prices maintained their bullish potential and remained poised to hit record highs around $2,800 per ounce.
“Gold price must seek a daily closing above the November 2024 high of $2,762 to take on the next target near the aforementioned resistance near $2,790,” Dhwani Mehta, analyst at FXstreet, said in a report.
Source: FXstreet
However, analysts said the market may remain cautious ahead of the release of key US economic data on Thursday and Friday.
“That’s not to conclude that gold can easily take out its record high without some pullback or consolidation, although it’s certainly possible.” Morrison said.
If it does manage to push up further, the next test will be how it behaves if it makes a fresh record high. Looking back, history suggests that a sell-off will follow.
Meanwhile, Menghani said that it would be wise to wait for strong follow-through selling before confirming that the one-month-old uptrend in gold prices has reversed and positioning for deeper losses.
Copper extends fall
Copper prices extended their decline due to escalating worries that potential US tariff increases could hinder global economic growth and dampen demand for industrial metals like copper.
Adding to these concerns, the threat of tariffs has sparked fears of weaker demand from China, the world’s top copper consumer.
Tariffs could further pressure China’s economy, which is already grappling with slowing industrial production and sluggish domestic growth.
At the time of writing, the three-month copper contract on the London Metal Exchange was at $9,163 per ton, down 0.9% from the previous close.
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