Gold's Decline: Analysis and Outlook

By Camilo Botia, CSC?

At the beginning of September, gold experienced a decline in value and approached its 200-day moving average. This drop is attributed to the continuous strengthening of the U.S. dollar and persistent concerns regarding the global economy.

Gold has recently reached its lowest point in the past week, with a price of $1,925.76 per ounce. This decline is a result of investors shifting towards the U.S. dollar, which has been on an upward trend for eight consecutive weeks, marking the longest streak since 2005. The growing unease about global economic growth, especially in China and the eurozone, has led to the safe-haven dollar reaching multi-month highs against various currencies. Consequently, gold has become more expensive for international buyers, reducing demand and thus the price.

Despite the decline observed in September, gold has maintained a positive performance of 5.5% since the beginning of the year. However, it has dropped nearly 7% from its 2023 peak, recorded at $2,067 on May 23.

Over the past several months, the price of gold has exhibited a downward trajectory, transitioning from the upper bounds of its bullish channel to the lower range, hovering around $1,900 per ounce. Notably, the nearest level of support is found at the 200-day moving average, specifically testing levels at $1,916.07. This moving average was breached on August 23 but still holds significant importance as a price floor. Furthermore, the lower boundary of the bullish channel aligns with the $1,900 mark.

The struggle of the ADX indicator to surpass 20 points suggests a need for a clear trend in the gold market. This lack of a well-defined direction may help explain the sideways movement that gold has exhibited since mid-May, fluctuating between $2,000 and $1,900.

Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.

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