Gold prices have fallen to a key support level from a major trendline for the long-term uptrend, hovering around $2,600. The decline in Gold prices can be attributed to the strength of the US Dollar, competition from alternative assets like Bitcoin, and rising stock prices. Expectations of the Federal Reserve slowing down interest rate cuts and reduced safe-haven demand are also contributing factors to Gold’s price decrease.
The strong US Dollar is putting pressure on Gold as market sentiments suggest that President-elect Donald Trump’s economic policies will benefit the Dollar. Trump’s plans to impose tariffs, reduce taxes, and address immigration issues could lead to higher inflation in the US, prompting the Fed to slow down interest rate cuts. Higher interest rates are generally negative for Gold as it increases the opportunity cost of holding the non-interest paying asset.
Competition from alternative assets like Bitcoin and rising stock prices are also impacting Gold prices. Bitcoin, which is reaching new all-time highs, is benefiting from expectations of relaxed regulations under the Trump administration. Additionally, positive investor outlook on lower corporation tax and looser regulations is driving up stock prices, diverting investment away from Gold.
The perception that Trump may resolve conflicts such as the Ukraine-Russia war is reducing the safe-haven demand for Gold. Reports of Trump’s discussion with Putin regarding Ukraine may have influenced a decrease in the need for safe-haven assets. However, ongoing conflicts in the Middle East, particularly between Israel and its neighboring countries, continue to fuel geopolitical tensions, potentially supporting the demand for Gold as a safe-haven asset.
From a technical analysis perspective, Gold has broken below the 50-day Simple Moving Average and is currently in a short-term downtrend. A decisive break below the major trendline could confirm a further extension of the downtrend, with a potential target at $2,538. Despite the current bearish price action, the precious metal remains in an uptrend on a medium and long-term basis, suggesting the possibility of a reversal in the future.
In the world of cryptocurrencies, Bitcoin remains the dominant player by market capitalization, functioning as a decentralized form of money. Altcoins refer to any cryptocurrency other than Bitcoin, with some exceptions like Ethereum, which has undergone forking from Bitcoin. Stablecoins are cryptocurrencies designed to maintain a stable price by being backed by a reserve asset, providing investors with an on/off-ramp for trading and investing in cryptocurrencies. Bitcoin dominance, the ratio of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies, is a key indicator of investor interest and market trends in the cryptocurrency sector.
