- The price of gold reverses an intraday fall to the area of $1,811, although it lacks continuity.
- The dollar fails to sustain its modest intraday gains and offers support to the metal.
- Aggressively, central banks and risk appetite act as a headwind for XAU/USD.
the price of gold is pushing to take advantage of the previous day’s rally of around 2% and hits a roadblock near the $1,822-1,824 region, or its highest level since late June hit earlier this month. However, the intraday decline proves short-lived and stalls near the $1,811 area. XAU/USD turns neutral during the early hours of the American session and remains at the mercy of the US dollar price action.
The modest fall in the dollar offers support to the price of gold
Indeed, the US Dollar Index (DXY), which measures the dollar’s performance against a basket of currencies, pared its modest gains amid a fresh leg down in US Treasury yields. This, in turn, is seen as a key factor providing some support to the US dollar-denominated gold price. XAU/USD’s upside potential, meanwhile, appears limited amid supportive risk appetite momentum and prospects for further policy tightening by major central banks, including the Federal Reserve (Fed).
Aggressive central banks could continue to cap the price of gold
It should be remembered that the US Central Bank took a tougher tone and indicated that it will continue raising interest rates to combat persistently high inflation. In addition, the European Central Bank (ECB), the Bank of England (BoE), the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) have signaled that further hikes are likely. . This, in turn, could discourage traders from making aggressive bullish bets on the gold price without yields and limit profits.
Recession fears could be a tailwind for the gold price
That said, rising recession fears amid rising COVID-19 cases in China and geopolitical risks could benefit the safe haven gold price. In the latest development surrounding the Russia-Ukraine saga, Ukrainian President Volodymyr Zelensky is traveling to the United States to meet with President Joe Biden. Russia, for its part, claims that there is no possibility of peace talks and that the continued supply of weapons to Ukraine by the Western allies would lead to a deepening of the ongoing conflict.
Focus is on important US macroeconomic data
Investors may prefer to wait for this week’s important US macroeconomic data to find a new catalyst. The final release of US GDP for the third quarter is scheduled for Thursday. Next, attention will turn to the US core PCE price index (the Federal Reserve’s preferred indicator of inflation), which should give the gold price a significant boost ahead of the holiday season.
Gold Price Technical Outlook
From a technical perspective, acceptance above the all-important 200-day Simple Moving Average (SMA) favors the bulls. The constructive setup is bolstered by the fact that the oscillators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone. That being said, it would be prudent to wait for buying beyond the multi-month high, around the $1,822-1,824 area, before positioning for further gains.
On the other hand, the breakout of the horizontal resistance of $1,812-$1,810 seems to protect the immediate fall. Any further pullback could attract new buyers near the $1,800 signal, which in turn would help limit the dip near the 200-day SMA. The latter is currently near the $1,786 zone and should act as a solid base for the gold price, which if broken decisively could negate the short-term positive outlook.
Key levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
