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Gold remains under pressure with little reason to rally

Gold prices remained subdued on Thursday during a relatively quiet week in the markets, which have continued to exhibit extremely low volatility. Recently plunging crude oil prices have stoked some market concerns, but crude staged a tentative rebound on Thursday, alleviating some of that market pressure. The past few days have seen gold attempt a relief rally after two weeks of sharply falling prices that have been exacerbated by market complacency, a modestly stronger US dollar and more hawkish-leaning central banks, most notably the Federal Reserve.

In this current market environment, with the relative absence of any major catalysts for gold appreciation, pressure on the precious metal is likely to continue. Though the trend for gold prices since December is still bullish, even a minor breakdown could disrupt and possibly reverse this trend. In addition, the longer-term trend going back around a year continues to be bearish.

As it currently stands, this week has seen a weak attempt at a rebound from a key uptrend support line extending back to the mid-December lows. With little in the way of substantial drivers for this rebound, however, upside momentum has been very limited. Technically, the key event to watch for would be a resumption of pressure on gold prices, which could prompt a breakdown below the trend line. Such a breakdown would help confirm the recent break below the key $1250 level. In this event, the next major downside target is around the $1215 price area, which represents May’s lows, followed by the key $1200 psychological support level.

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