The Gold Spot Price (XAUUSD) navigates a challenging landscape, witnessing a 1.83% retreat this week, erasing last week’s modest gains.
In a dramatic shift, the precious metal now flirts with a five-week low, a stark contrast to the persistent ascent of the Greenback, which asserts itself at a five-week high. The downturn in the gold spot price is accentuated by a breach of a critical technical level—the Fibonacci Retracement Golden Ratio—a level that had steadfastly resisted downward pressures until now.
This intriguing narrative unfolds against the backdrop of robust economic data from the U.S., tempering traders’ hopes for early interest rate cuts. A noteworthy surge in U.S. retail sales, exceeding expectations at 5.6% in December against the anticipated 4%, injects vigour into the Greenback’s rally. Policymakers’ resistance to premature rate cuts, insisting on a confident decline in inflation before policy adjustments, further fortifies the dollar’s ascendancy, leaving the yellow metal at the mercy of shifting economic tides.
Technical
The Gold Spot Price finds itself entangled in a bearish narrative, succumbing to back-to-back days of losses and revealing signs of a downtrend beneath the 100-day moving average.
Initially, a resilient support emerged at $1973.03 per ounce, coinciding with oversold Relative Strength Index (RSI) conditions. Buoyed by this, the spot price surged beyond the 100-day moving average and breached the psychological $2000 per ounce threshold, only to be met with resistance at $2088.43 per ounce, where overbought RSI conditions prevailed.
This tug of war saw a subsequent downturn, with the spot price slipping beneath the 100-day moving average, validating a short-term downtrend. The breach below the 61.80% Fibonacci Retracement Golden Ratio as an intermediate support signals increased bearish momentum. As the downward pressures persist, attention turns to a potential retest of the $1973.03 per ounce level. Alternatively, given the oversold RSI conditions currently prevailing, a pivot to the upside could find interest at the 50% level, contingent on a shift in market sentiment favouring the bulls.
Summary
In a tumultuous week, the Gold Spot Price faces headwinds as it breaches the Fibonacci Retracement Golden Ratio, emblematic of heightened bearish momentum. The interplay between key levels, from $1973.03 to $2088.43 per ounce, unfolds amidst economic shifts, accentuating the metal’s vulnerability to the Greenback’s rally and evolving market sentiment.
Sources: U.S. Census Bureau, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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