Ole Hansen, head of commodity strategy at Saxo Bank, identified $4,075 per ounce as the next key support level for gold in an update published Tuesday, as the metal trades below its 200-day moving average amid labor market strength and rising inflation. Hansen attributed the decline to energy-driven inflation concerns, rising bond yields, and a firmer dollar, which have shifted investor focus away from gold's traditional portfolio diversification role. The breakdown below the 200-day moving average represents a significant technical setback that has triggered position reductions among systematic funds and momentum traders, though Hansen noted the long-term bullish case remains intact.
200-Day Moving Average Break Triggers Technical Selling
Hansen stated that gold's slide below the 200-day moving average constitutes an important setback beyond technical damage. "While the long-term bullish case remains intact, the market is currently being driven by a very different set of forces," he said, noting that since mid-April, gold has traded as a victim of an energy-driven inflation scare. Hansen explained that the 200-day average serves as an important trend filter for medium- and long-term investors, and a sustained break below can trigger position reductions while discouraging fresh buying from investors who prefer confirmation that the broader trend remains intact.
Hansen identified the $4,100 to $4,075 area as the next significant support zone, marking both the March correction low and the 38.2% retracement of the rally that began in 2022 and carried gold close to $5,600 earlier this year. He noted that the latest setback in U.S.-Iran negotiations has reinforced the current dynamic, with the ongoing conflict threatening energy supplies and keeping inflation risks elevated.
ETF Holdings Decline 88 Tonnes While COMEX Positioning Stabilizes
Hansen reported that Bloomberg-tracked gold ETF holdings have declined by 88 tonnes this year to 3,048 tonnes, although holdings remain 282 tonnes higher than a year ago. Speculative positioning in COMEX gold futures has stabilized after recently falling to a two-year low, with managed money and other reportable traders currently holding a net long position of around 171,000 contracts, up from a recent low near 149,000 contracts but below the one-year average of 194,000 contracts.
"With volatility easing and margin requirements falling from recent peaks, the key missing ingredient for renewed demand is momentum," Hansen added, noting that momentum remains negative due to the downtrend in place since March.
Hansen Sets $4,500 Reclaim as Prerequisite for Momentum Shift
Hansen stated that gold prices will need to reclaim $4,500 per ounce before challenging the 50-day moving average near $4,600 for momentum to return. "Until then, traders are likely to remain focused on downside risks while longer-term investors wait for a catalyst capable of shifting attention away from inflation fears and back towards the structural drivers that underpin the broader bull market," he said.
Hansen noted that markets will be looking ahead at Fed chair Kevin Warsh's first FOMC meeting following this morning's U.S. CPI report, which may provide clues regarding policymaker concerns about the inflation outlook. He concluded that a durable peace agreement and normalization of energy markets remain the most likely catalysts for shifting investor focus back to longer-term themes including central bank reserve diversification, growing fiscal debt burdens, currency debasement concerns, and an increasingly fragmented geopolitical landscape.
FAQ
What did Ole Hansen say about the $4,075 gold price level?
Ole Hansen identified the $4,100 to $4,075 area as the next significant support zone for gold, marking both the March correction low and the 38.2% retracement of the rally that began in 2022 and carried gold close to $5,600 earlier this year.
Why did gold fall below its 200-day moving average according to Hansen?
Hansen attributed the decline to energy-driven inflation concerns, with investors focusing on rising oil prices, higher inflation expectations, stronger bond yields, and a firmer dollar rather than gold's traditional role as a portfolio diversifier. He noted the latest setback in U.S.-Iran negotiations has reinforced this dynamic by threatening energy supplies and keeping inflation risks elevated.
What needs to happen for gold's bullish momentum to return according to Saxo Bank's analysis?
Hansen stated that gold prices will need to reclaim $4,500 per ounce before challenging the 50-day moving average near $4,600 for momentum to return, with a durable peace agreement and normalization of energy markets serving as the most likely catalysts for shifting investor attention back to longer-term bullish themes.
