Gold down more than 7% since its peak

In May 2023, gold reached its highest level since August 2020 $2,078.54according to the financial statements from ActivTrades on gold.

Earlier this year, the ongoing banking crisis and uncertainty in the financial markets supported the price of gold.

It is interesting to note that during the first quarter of the year, demand for gold from central banks reached an all-time high since the data series began in the 2000s, according to World Gold Council.

The weakness of the US dollar at the beginning of the year also helped support the demand for gold, without forgetting that the recent increases in interest rates in the United States and around the world may lead to a mortgage crisis, recession, and more bank failures, all of which would push investors to buy gold.

Since its peak, the price is down more than 7%, and the overall technical formation is somewhat bearish on the daily chart.

the prices less Tenkan and Kijun lines, in addition to the Ichimoku cloud, Lagging Span line is also less Prices and cloud are going down without major hitches.

The Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) are two bearishwhile the Parabolic SAR is above Price, to tell traders a better option short from long positions.

What makes the price of gold move up and down?

Understanding the factors that move the price of gold is essential for any investor.

By gaining insight into these factors, you can make more informed decisions regarding the future movement of gold and whether it is better to open long or short trades.

One of the primary characteristics of gold is its historical role as a safe haven asset during times of economic uncertainty and market volatility.

When faced with financial turmoil, investors often turn to gold as a “journey to quality” rather than choosing riskier assets like stocks.

The perception of gold as a stable and reliable store of value makes it an attractive option for protecting wealth in turbulent times.

Moreover, gold is often seen as a hedge against inflation. In periods of high inflation, investors may turn to gold as a way to maintain their purchasing power.

However, the decision to invest in gold as a hedge against inflation is influenced by the specific monetary context and the extent to which inflationary pressures are expected to persist.

Central bankers play a vital role in assessing the nature of inflationary pressures. They watch economic indicators and data closely to determine whether inflation is temporary or likely to continue in the long term.

These ratings directly influence monetary policy decisions made by central banks.

If inflation is considered a major concern, central banks may implement measures to combat it, such as tightening credit conditions by raising interest rates and cutting back on economic stimulus programmes.

These measures, aimed at controlling inflation, could have implications for gold’s attractiveness as an investment option. As benchmark interest rates rise, real interest rates are affected, which in turn affects the demand for gold.

Another factor to consider is the relationship between gold and the US dollar (USD). Gold is priced in US dollars, and as a result, the two assets often show negative correlation.

When US interest rates rise, the US dollar tends to strengthen against other currencies.

A strong US dollar can affect the price of gold, as a strong dollar makes gold relatively more expensive for investors who use other currencies.

In addition, the dynamics of supply and demand for gold is affected by other factors. Gold demand in the jewelry sector, investment demand from individuals and institutions, central bank activities involving the purchase or sale of gold, and industrial use of gold all play a role in shaping market dynamics.

Monitoring economic indicators, staying abreast of geopolitical developments, and being aware of market expectations is critical to understanding broader market conditions and potential price volatility for gold.