Gold (XAU/USD) on pace for worst two-weekly performance since November 2024: Can support be found at $4,000?

With last week’s trading being its most volatile year to date, large movements in gold pricing remain on the cards.

At the time of writing, gold trades at approximately $3,994 per troy ounce, up +1.05%, having conceded some gains made earlier in today’s session.

If we are to return to the highs, gold will need to find support at the key psychological level of $4,000, although a further retracement is entirely possible considering how far price action strayed from key moving averages.

Will gold find support at $4,000?

This, and much more, in today’s article, as we attempt to answer the question: what’s next for gold bullion pricing?

• Now trading almost 9% lower than all-time highs made nine days ago, gold has recently come under some selling pressure on technical profit-taking and some, albeit fleeting, US-China trade optimism

• Recent developments regarding Fed monetary policy have done little to move the needle, with markets still overwhelmingly predicting a 25 BPS cut later today. As such, rate cuts have been priced in for some time, and unless there is further dovish commentary from Powell, it offers gold little upside in the immediate

• Albeit off the boil recently, gold remains supported technically and boasts a strong fundamental footing, especially considering the health of the ‘currency debasement’ trade
  

Most read: Gold (XAU/USD) Price Down 5.7%, Biggest Daily Drop Since 2020. What Next for Gold Prices?

While using 'now or never' to describe current gold price action is almost entirely a matter of artistic license, the yellow metal will need to find support at $4,000 or risk a further leg down towards its moving averages, which remain at a significant distance from current pricing on the weekly chart.

With the recent rally posting gains of over 30% since August, it would be fair to say there were some significant grounds for a retracement, only being a matter of when.

Bulls can still be encouraged, however, considering that price seems to be attempting to form a base at $3950 after recent downside.

As ever, let’s dive into some macroeconomic themes currently at play in the precious metals markets:

Easing US-China tensions: Serving as part of the reason for recent downside, dampened safe-haven demand is negatively impacting gold pricing, with markets becoming increasingly more optimistic on the success of a US-China trade deal. With officials from both nations making comments to suggest a rough framework is already in place, things bode well looking ahead to President Trump’s meeting with President Xi, scheduled to take place tomorrow.

As a knock-on effect, increased cooperation efforts on trade between the world’s two largest economies have removed a significant headwind to the recent gold rally.

Federal Reserve 25 BPS cut fully priced-in: In its ascendancy this year, gold rallied in the face of a staunchly hawkish Fed. More recently, however, and as Powell and other policymakers have become more dovish, this has introduced further upside to bullion, with lower rates benefiting gold, lowering the opportunity cost of holding metals over government bonds and cash.

However, with the market more confident than ever before that a second 25-basis-point cut will be made later today, it is safe to say that this facet of market fundamentals has been priced in for some time.

As a result, any impetus granted to the ongoing gold rally on this basis is well and truly out of steam, or at least until the Federal Reserve sheds some light on how they may choose to vote in their final decision of the year in December.

Health of the ‘currency debasement’ trade: While this article aims to provide some rationale for the recent downside in the precious metal markets, it is essential to remember that gold remains on a robust fundamental footing, especially when considering similar time periods in history.

Especially regarding skyrocketing US sovereign debt, and how the current administration has offered little reassurance on how this will be brought below an eye-watering $37 trillion, other political developments worldwide have done little to breed confidence within the global economy.

Not to mention the fiscal stimulus spree offered in 2020, markets are increasingly concerned about the future of fiat currencies like the dollar, a phenomenon known as currency debasement, which describes a decrease in the real value of a currency.

Similar concerns about government debt have previously provided significant upside for precious metals, as seen during the 2009 Euro Area Crisis. As such, the upside in gold this year, and indeed other assets like bitcoin, can be partly explained by this phenomenon.

There’s no sense denying it: the recent sell-off in gold pricing is predominantly technical.

Naturally, prices in the markets don’t trend in straight lines: if they did, we’d all have more money than we know what to do with.

I mean to say, retracements towards the average are necessary for an uptrend to continue, although you could be forgiven for forgetting that when looking at recent gold price action.

On the four-hourly, downside was bookmarked by a double-top pattern, which would spell the start of current downside. Since then, we’ve seen two SMAs cross, suggesting that further retracement is likely, at least in the short term.

Price has reacted well at the 200-period SMA, however, with a candle late into yesterday’s session forming an obvious pinbar.

Most importantly, the 200-period SMA has previously acted as a significant level of support, most notably at the start of the recent rally in August.

Albeit fundamental, traders would be well-advised to keep the above in mind ahead of the Trump-Xi meeting tomorrow.

Price targets and support/resistance levels:

• Price target 1: Psychological key level: $4,000
• Price target 2: Previous swing lows: $4,032
• Support 1: Previous swing lows: $3,953
• Support 2: 200-period SMA: $3,938

Read Łukasz’s analysis on US equities in today’s session: U.S. Companies Surprise with Strong Sales Results