- The price of gold rises on Thursday and is supported by a slight weakness in the US dollar.
- Recession fears provide additional support for XAU/USD, although the upside looks limited.
- Expectations of more rate hikes from the Federal Reserve should act as a headwind for the gold price.
The price of gold (XAU/USD) it attracts some buying on Thursday and recovers some of the previous day’s losses to the $1,830 area, its lowest level since January 6. The XAU/USD maintains its gains during the first part of the European session and is currently hovering around the upper limit of its daily range, around the $1,840 level.
The slight weakness of the dollar benefits the price of gold in the face of recession risks
The dollar retreats from the highs of six weeks reached on Wednesday amid a modest decline in US Treasury yields. This, in turn, is seen as a key factor driving some money flows into the price of gold, denominated in US dollars. Apart from this, fears of a global recession lend additional support to the precious metal, although a significant rally still looks unlikely.
Expectations of further rate hikes by the Federal Reserve could constrain XAU/USD
Investors seem convinced that interest rates will continue to rise for longer in a context of persistently high inflation. These expectations increased after the publication on Tuesday of the Consumer Price Index (CPI) of the United States (USA). In fact, the markets anticipate a rise of at least 25 basis points at each of the next two Federal Open Market Committee (FOMC) meetings, in March and May.
In addition, several FOMC policymakers, including Fed Chairman Jerome Powell, recently stressed the need for further increases in interest rates to fully control inflation. This should act as a tailwind for US bond yields and support the dollar, but not gold.
Therefore, it will be prudent to wait for strong follow-through buying around gold before turning more bullish.
US macroeconomic data will boost the price of gold
Today the data will be published US Producer Price Index (PPI), which will provide new clues about inflationary pressures. This, in turn, will influence expectations about the Fed’s future rate hike campaign.
Also on Thursday’s US economic calendar are the Philadelphia Fed’s manufacturing index, the usual weekly initial jobless claims, building permits and housing starts.
These macroeconomic data, along with US bond yields, could boost demand for the dollar. Apart from this, the broader risk sentiment should allow traders to take advantage of some short-term opportunities around the gold price. However, the fundamental background appears to be leaning firmly in favor of USD bulls and suggests that the path of least resistance for XAU/USD is to the downside.
Gold Price Technical Outlook
From a technical point of view, the fall of the previous day confirms a break below the 50-day simple moving average (SMA) and reinforces the negative outlook. Therefore, a further drop towards the intermediate support of $1,818-$1,817on the way to the round level of $1,800It seems like a clear possibility.
On the other hand, the $1,852-$1,853 area could act as an immediate hurdle ahead of the 50-day SMA, currently around the $1,860.
If XAU/USD continues to rise, it will most likely attract new sellers and remain capped near the trading zone. $1,871-$1,872the weekly high, which should now act as a key point.
Gold additional technical levels
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.
