Possible Short-term Correction Coming For Gold

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Tobias Robinson
Tobias Robinson

The tightening from the Federal Reserve is pushing the value of the dollar sky high, but gold prices have been lagging behind quite noticeably. However, there is the possibility of a short-term bounce in the near future, presenting an opportunity to traders.

Investors still have rising inflation right at the front of their minds. This is a result of bullish greenback overtones that are very prominent in capital markets.

The story for gold has been a reversal – strong out of the gate in 2022 before losing steam by the time the spring arrived.

Analysis Of Gold Pricing

Gold tends to be bearish overall, but it is approaching substantial possible exhaustion levels.

The result could well be a bullish correction or trend, at least in the opinion of Moor Analytics founder Michael Moor.

He feels we have seen breaks below a number of ‘bearish formations‘, but it is likely we are in the final structural stretch downwards from the highs.

From the technical perspective, however, there are market strategists who see the potential for a bounce in the coming weeks.

They interpret that the recent drawdown in the price of gold has been caused by the rallying US dollar, which has undergone a period of overextension technically.

Some Things To Consider

With the XAUUSD RSI being oversold, it could be about time we saw a short-term trading bounce for gold, according to Colin Cieszynski of SIA Wealth Management.

Of course, there is a great deal of capital moving into the USA in search of a safe haven, so it is possible that gold will go on struggling against the USD.

Watchful Strategy

Instead of making indirect plays on gold futures and miners, investors may want to prioritise ETFs that focus on physical gold. This may offer a more tangible means of playing gold prices. These funds should be:

  • Physically backed with gold bullion bars
  • Transparent about those bars
  • Priced at an internationally-recognised benchmark
  • Based on highly secure vaults

It is certainly worth watching closely in the coming weeks and signs of a bounce should be capitalised on.