Gold prices have dropped for the second consecutive week, dipping below the $2,000 mark, with a run again expected to give long traders some pause. The spot price of gold was down $25.24, or 1.2%, to $1,979.57, and the June delivery on New York's Comex settled down $28.60, or 1.4%, at $1,990.50. The dip follows a three-year high of $2,048.60 reached on April 13, with Comex's most-active gold contract losing nearly 3% since then. The decline began after the dollar and U.S. Treasury yields rebounded from one-year lows, with a direct contrarian trade to the dollar leading to the current downturn. There are also concerns that the Federal Reserve may agree to another quarter-point increase at its May 3rd rate decision, taking U.S. interest rates to a peak of 5.25%.
Despite these factors, traders remain indecisive on the yellow metal. Craig Erlam, an analyst at online trading platform OANDA, noted that higher Treasury yields had stalled the rally in the yellow metal. However, "traders are clearly in no mood to give up on the yellow metal," he said. Sunil Kumar Dixit, chief technical strategist at SKCharting.com, agreed, stating that "sellers are still eyeing the next Fibonacci leg lower of 38.2% in spot gold that will test the support of $1,955. On the higher side, $1,992 is expected to be resistance." The uncertainty over the path of interest rates is expected to continue for the next month or two, adding to the indecision in gold prices. However, big support remains around $1,940-$1,960, and traders are watching to see if this support holds.
As gold continues to struggle with lower prices and indecision, traders are keeping a close eye on market conditions. While the appeal of risk-heavy assets may be limited, the future path of interest rates will play a key role in the yellow metal's future performance. The current dip in gold prices may offer an opportunity for some traders to buy the dips, but caution is advised as market conditions continue to evolve.
