The gold market opened this morning with dramatic price swings, initially attempting a sharp rise before quickly slipping back into negative territory. Although many traders rush to explain these movements after they happen, here at Smart Money Brief Team, we respect your intelligence. We always present clear, logical reasons before price action occurs.
In fact, during our Friday video, we discussed the likelihood of early market closures and holiday-related volatility. As predicted, that’s precisely what unfolded. Let’s quickly revisit our Friday analysis.
Gold Prices Reacted Sharply to Recent Data But Did the Trend Really Change?
After key economic data was released, gold prices initially dropped, only to bounce back by around $20 this morning from roughly $3,324 to $3,344. However, has this rebound truly shifted the broader trend?
Frankly, the answer is no.
Fundamentally, there’s been no new information to suggest a bullish reversal in gold. Technically, both gold and silver continue to flash negative signals across multiple time frames. So why, you might ask, did we witness this morning’s spike?
It’s quite simple. As we noted during our live session yesterday, today’s market was vulnerable to erratic swings due to the absence of major U.S. market participants. Without them, volatility was inevitable.
Beware of Market Myths and Unrealistic Predictions
Throughout the weekend, our inbox was flooded with questions from traders expecting explosive gaps or surging gold prices at the open. However, these expectations were unfounded.
Many traders cited rumors like failed trade talks between the U.S. and Europe or fear-driven narratives involving emerging political parties in the U.S. These claims were not only exaggerated but outright misleading.
We clearly stated that such arguments were weak at best and that a bullish price gap was unlikely. And indeed, no such gap occurred. In reality, gold prices quickly returned to their prevailing bearish pattern.
Why the Current Rebound Is Not a Concern (Yet)
During Friday’s session, we held onto an open short position from $3,338, which hit its target successfully. Even as prices flirted with higher levels like $3,344, we maintained our view that such rebounds were merely temporary noise.
It’s essential to keep a cool head during times like these. Whether bullish or bearish, always pay close attention to key levels. This morning’s price action perfectly respected these levels, bouncing precisely from known zones such as $3,311.
Today’s Key Economic Focus: China’s Gold Reserves
Looking ahead, traders are watching China’s upcoming foreign exchange and gold reserve reports. While there are rarely specific forecasts for China’s gold holdings, we’ll be updating you immediately on both YouTube and our Telegram channel once the numbers are released.
Our YouTube channel isn’t just for videos we also post instant updates, charts, and brief commentary, keeping you fully informed in real-time.
Recapping Recent Economic Drivers
Friday’s price moves were driven largely by the U.S. jobs data and the passage of a major tax cut law. We already warned that the effects of these developments would extend beyond Friday’s session and indeed, today’s early price dips confirmed this.
Currently, gold is hovering near its first key support level of $3,311. Unless China surprises with unexpected moves in its reserves, the bearish pressure is likely to continue.
Gold Market Forecast: Key Support and Resistance Levels
Here are today’s crucial levels to watch:
- Pivot Point: $3,329
- Resistance Levels: $3,340, $3,355, $3,368, $3,388, $3,411
- Support Levels: $3,321, $3,311, $3,296, $3,275, $3,250, $3,231
Notably, support levels remained unchanged from Friday’s analysis, signaling continued relevance. In contrast, resistance levels have adjusted, suggesting shifting market sentiment.
What to Expect from China’s Gold Reserves Report
Historically, China has maintained modest gold purchases usually between 2 to 3 tons monthly. If China continues this trend or even reduces its buying activity, it would indicate a preference for preserving foreign reserves over accumulating more gold at current prices.
This cautious approach could weigh on gold prices in the near term, especially if paired with stronger U.S. economic data.
Technical Analysis: Will Support Levels Break?
After repeated tests of the $3,311 level today, we anticipate an imminent breakdown. The technical signals, combined with persistent negative fundamentals, point toward an acceleration of the downtrend.
Should gold decisively break below $3,311, we expect a fast-paced move lower, with the $3,275 level serving as the next critical target.
Debunking the Tax Cut “Gold Bullish” Myth
Some market commentators have argued that recent U.S. tax cuts will fuel inflation and boost gold prices. However, this perspective overlooks the broader context.
While higher debt levels and inflation concerns do exist, markets are more focused on the immediate benefits stimulating the economy, attracting foreign investment, and boosting GDP.
Put simply, the so-called inflation fears are like an ant on the scales compared to the economic “elephant” of improved growth. Therefore, we view these tax cuts as positive for the U.S. dollar and negative for gold in the short term.
Gold Market Strategy: Caution Ahead
We always emphasize logic and reason over hype. Right now, we advise caution with bullish gold trades, especially as prices remain below $3,340. Any rebounds toward this zone may offer fresh selling opportunities.
Additionally, keep an eye on $3,275, which has acted as a critical floor in previous sessions. While it remains strong, today’s price action suggests that this level is increasingly vulnerable to a breakdown.
Final Thoughts: Bearish Momentum Persists
In conclusion, gold remains in a clear downtrend. Unless significant new information emerges, every bounce remains a potential short-selling opportunity.
The bottom line? A break below $3,311 would likely trigger a new wave of selling, potentially dragging gold toward $3,275 or even lower.
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TL;DR:
Gold prices remain under pressure. Key support at $3,311 is being tested repeatedly. A break below this level could trigger sharper declines toward $3,275. Watch China’s gold reserves report and U.S. economic data for the next market catalysts.
