Gold spots (XAUUSD) are currently trading flat, around $2,034.89, on track for a minor weekly decline. The decline in Gold prices by 0.06% this week is attributed to a range-bound play around $2,040, with a pivotal focus on upcoming US Consumer Price Index (CPI) revisions. The cautious optimism and negative US Treasury bond yields have capped the US Dollar’s rebound, maintaining gold’s hopefulness as long as the support holds at $2,035-$2,030.
The market sentiment is influenced by US inflation data and recent hawkish comments from Fed policymakers, including Richmond Fed President Thomas Barkin. Despite early pressure from higher US Treasury bond yields, gold finds support amid renewed selling pressure on bond yields, attributed to US-China trade tensions.
Looking ahead, the price of gold is likely to be swayed by broader market sentiment, US CPI revisions, and forthcoming Fed speeches. However, end-of-the-week flows and repositioning ahead of the US inflation report may trigger sharp moves.
Technical
On the 4-hour chart, gold is currently priced at $2,034.89/ounce. The price action is trending slightly lower as the 38.20% Fibonacci retracement level continues to act as a significant upside barrier. Trading along the 20-SMA (green line), below the 50-SMA (blue line), and just above the 100-SMA (orange line), indicates a cautious market. The possibility of continued downward pressure suggests potential support at the 23.60% Fibonacci retracement level, marked at $2,022.24/ounce. A breach of this initial support level could open short-term trading opportunities, guiding the price towards $2,011.28/ounce and $2,001.79/ounce.
Conversely, the prospect of short-term trading opportunities arises if the price action manages to sustain a push above the 38.20% Fibonacci retracement level. Such a move could initiate a bullish momentum, with the 50.00% Fibonacci retracement level, situated at $2,045.11/ounce, becoming a potential target. Moreover, breaking above this level would likely propel the market towards the 61.80% Fibonacci retracement level, standing at $2,055.33/ounce, bringing it within reach for the bulls in the short term.
Summary
Gold is currently caught in a tug-of-war between bullish and bearish forces. The upcoming CPI report and the Fed’s stance on rate cuts will be key factors shaping the near-term direction of gold prices. Technically, the price action is neutral, with potential for both upside and downside moves depending on the breakout direction.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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