Gold price extended its previous gains as the fear & greed index signalled further improvement of the risk sentiment. As at the time of writing, the precious metal was at $1,778.03; up by 0.38%.
Last week, the greenback dropped by close to 5%. The plunge was largely founded on the dovish CPI figures and subsequent hopes that the Fed will taper on its interest rate hikes in coming months. Seeing that gold price is usually inversely correlated to the value of the US dollar, the market sentiment boosted the precious metal to a three-month high of $1,772.95 on Friday.
The asset has extended its gains in the current week; hitting a fresh 3-month high of $1,787.71 earlier on Tuesday. This comes as the fear & greed index has shifted to the greed end of the spectrum with a reading of 67. In comparison, the level of greed was lower in the past week at 58 and an extreme fear level of 21.
On Sunday, Fed Governor Christopher Waller noted that the central bank may begin to think about slowing the pace of their interest rate hikes. Similar sentiments have been expressed by Mary Daly, Loretta Mester, and Lael Brainard. An environment of high interest rates has been weighing on gold price as Treasury yields and the US dollar rallied.
Gold price prediction
As seen on its daily chart, gold price remained above the 25 and 50-day exponential moving averages. Based on both the technicals and fundamentals, I expect the bullish trend experienced in recent weeks to continue in the short term.
In particular, the bulls will be keen on defending the crucial resistance-turn-support level of 1,750. For as long as the precious metal remains below the lower level of 1,693.31, the bulls will remain in control. On the upside, the next target will be at 1,795.66; above which the bulls will have an opportunity to hit the psychologically crucial zone of 1,800 for the first time since mid-August.