Gold prices (XAU/USD) retreated further from the near four-week high hit earlier on Tuesday and hit a fresh daily low near the $3,351/oz area to open the European trading session. The US dollar (USD) maintained its intraday gains with a small rebound and was seen as a key drag on gold. Moreover, the generally optimistic risk tone further weakened the demand for safe-haven gold and exacerbated the correction in gold prices.
However, trade-related uncertainties, rising geopolitical tensions and concerns about the deteriorating fiscal situation in the United States have curbed market optimism. Moreover, US dollar bulls seem reluctant to make big bets against the backdrop of growing expectations that the Federal Reserve will further cut interest rates in 2025. This in turn may further limit any meaningful depreciation in non-yielding gold prices.
Dip buying in gold prices helped limit losses; Monday’s breakout above the $3,325 mark played an important role
From a technical perspective, the overnight breakout above the $3,324-3,326 mark and the subsequent breakout above the $3,355 area were seen as key triggers for gold/USD bulls. Moreover, oscillators on both the daily/hourly charts remain in positive territory, suggesting that the path of least resistance for gold prices is to the upside. Therefore, any subsequent decline below the $3,355 area could be seen as a buying opportunity with limited downside near the $3,326-3,324 resistance-turned-support zone. However, some follow-up selling could see gold prices fall further below the $3,300 mark and test the $3,286-3,285 horizontal support zone.
On the other hand, bulls may now wait for gold prices to break above the $3,400 round number mark before positioning for the next relevant resistance level, which is the $3,430-3,432 zone. If gold prices sustain above this resistance, they should be able to retest the all-time highs reached in April and make another attempt to break above the psychological $3,500 mark.
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