Gold experienced a sharp decline after breaking and testing the rising wedge formation. Interestingly, this drop occurred amidst a looming debt ceiling crisis. Both Biden and McCarthy were able to stabilize the markets with their assurance that “no deal is not an option.” The rising dollar index did not help the gold too. As a result, the ongoing eight-month uptrend is currently being tested.
The trend finds support from the 100-day moving average, and following yesterday’s decline, gold is attempting to recover from the key support level. It is important to monitor the 1935 and 1920 support levels for a possible downside break. However, until a break occurs, downward movements may present buying opportunities.
There are big uncertainties in the short-term. Today’s PCE and core PCE data, as well as a potential debt ceiling deal that could materialize over the weekend, have the potential to trigger a downside break. Therefore, traders should exercise caution and be prepared for significant price swings in either direction, especially in the short term.
