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Bearish Sentiments Could Drive Gold Prices Lower

Gordon Kristopher

Why Could Gold Prices Fall below $1,180 per Ounce?

(Continued from Prior Part)

Trading range pattern

June gold futures contracts have been trading in a range for the past two months. Gold prices have been fluctuating between $1,180 and $1,220 per ounce within this trading range. The strong US dollar and weak demand are driving gold prices.

Key pivots

Bearish sentiments suggest that gold prices could hit the nearest support of $1,150 per ounce. Prices hit this mark last time in March 2015. The appreciating dollar might push gold prices lower. In contrast, the ascending triangle pattern suggests that prices could hit the resistance of $1,250 per ounce. Prices hit this level in February 2015.

The trading range suggests that prices could fluctuate broadly between $1,160 and $1,240 per ounce in the near term. Industry estimates suggest that the average gold production cost ranges around $1,000–$1,200 per ounce levels across major mines in the world. Psychologically, levels of $1,180 to $1,200 per ounce become very important for gold traders, jewelers, and distributors.

The declining gold prices impact ETFs’ margins like the the iShares Gold Trust (IAU). They also impact gold miners like AngloGold Ashanti (AU), Goldcorp (GG), and Yamana Gold (AUY). These stocks account for 17.58% of the Market Vectors Gold Miners ETF (GDX).

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