Gold prices extended the decline this week, falling to $1208.10 on Monday. This was the lowest level in the year 2014. Bullion price is headed for a first quarterly loss in a year in July-September.
Fundamental reasons for a drop:
1) USD index close to a 4-year high amid increased Fed-tightening expectations
2) Nominal de-escalation of geopolitical tensions between Russia and Ukraine
On Tuesday the price bounced to $1235 per ounce, but we see this bullish move as a corrective one. The global descending trend remains unchanged. These days the US macroeconomics is in the limelight. Clearly, any negative surprises will be bullish for gold, but there’s nothing you can do – the US recovery is gathering pace.
On the other hand, at the current levels the price may be supported by the increased physical demand. Firstly, the price is not so far from the 2013 lows anymore and could attract additional buyers at this point. Secondly, demand in China and in India typically accelerates in Q4 before the festive periods and wedding season.
Conclusion
Corrective bounce from $1210 could extend into the $1245 area in the coming weeks. The August–September trend resistance will likely limit the recovery. We still expect the $1180 level to be hit this year.
Chart. Daily XAU/USD
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