Gold Prices Plunge 2.7% as Risk Appetite Rises

Spot gold prices experienced a significant intraday drop, plunging over 2% as market sentiment shifted towards riskier assets. The decline was driven by a combination of factors, including easing trade tensions and rising optimism about global economic growth. The price of gold fell to $3,207.3 per ounce, marking a 2.7% decrease from its previous level of $3,233.78. This drop was the most significant since April 10, with a cumulative decline of over 8% in the past seven days.

The shift in market sentiment was largely attributed to the easing of trade tensions between the United States and China. Optimism surrounding the potential resolution of trade disputes led investors to move away from safe-haven assets like gold and towards riskier investments. This trend was further supported by the rising price of industrial metals, which indicated a growing confidence in global economic recovery.

The decline in gold prices was also influenced by the cautious views expressed by Federal Reserve Chair Jerome Powell. Powell's remarks suggested a more measured approach to monetary policy, which reduced expectations for aggressive rate cuts. This, in turn, lifted US Treasury bond yields, making gold less attractive to investors seeking safe-haven assets.

The combination of these factors resulted in a significant drop in gold prices, with the precious metal falling to its lowest level since April 10. The price of gold continued to lose ground on Thursday, pressured by a combination of factors including rising US bond yields and the optimism surrounding the US-China trade agreement. Traders were also looking ahead to key economic indicators, such as the US Producer Price Index and Fed Chair Jerome Powell's speech, for further guidance on the direction of gold prices.

Despite the intraday drop, some analysts noted that gold prices could attract fresh sellers near the 61.8% Fibonacci retracement level support breakpoint, around $3,265-3,266. From a technical perspective, the overnight breakdown through the $3,200 mark and a subsequent slide below the 61.8% Fibonacci retracement level of the strong move up in April could be seen as a fresh trigger for bearish traders. Oscillators on the daily chart have just started gaining negative traction, suggesting that the gold price could extend the fall further towards the $3,135-3,133 support. Some follow-through selling has the potential to drag the gold price further towards the $3,100 mark, which, if broken, might expose the next relevant support near the $3,060 region.

On the flip side, any attempted recovery above the $3,168-3,170 region might now confront stiff resistance ahead of the $3,200 mark. Any further move up might now be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the $3,230 area. The latter should act as a pivotal point, above which a fresh bout of short-covering move could lift the gold price to the $3,265 intermediate hurdle en route to the $3,300 round figure.