- Gold price remains on the defensive on Tuesday, albeit with no follow-up selling.
- Falling US bond yields keep dollar bulls on the back foot and support XAU/USD.
- Traders also seem reluctant ahead of Federal Reserve Chairman Jerome Powell’s testimony.
The price of gold (XAU/USD) it fails to capitalize on its modest intraday gains above the $1,850 area on Tuesday and remains below the previous day’s nearly three-week high. The XAU/USD weakens below the $1,845 level during the first half of the European session, as traders await testimony from Federal Reserve (Fed) Chairman Jerome Pow ell before opening new directional positions.
The testimony of Jerome Powell, in search of clues about the future path of rate increases
Powell’s remarks will be scrutinized for clues about the Fed’s future rate-hike path, which in turn will decisively influence the short-term trajectory of the gold price without yields. Recently, several monetary policy makers have come out in favor of further rate hikes and have opened the door to a rise of 50 basis points at the next Federal Open Market Committee (FOMC) meeting to be held later this month. On the other hand, new macroeconomic data from the United States indicates that inflation is not declining as fast as expected and point to an economy still resilient despite rising borrowing costs. Therefore, one more hawkish comment will offset any near-term positive outlook for XAU/USD and shift the bias back in favor of the bears.
Pullback in US bond yields, weaker demand for the dollar and recession fears offer support
Some market participants, however, unsure of Powell’s tone amid expectations that the US economy may be cooling. This, in turn, triggers some repositioning trade, which is evident by a modest pullback in US Treasury yields and keeps US dollar (USD) bulls on the defensive. Before the key event, USD weakness lends some support to gold price, denominated in dollars. Apart from this, the risks of a looming recession further contribute to limiting the fall of the safe-haven XAU/USD, at least for the time being. This, in turn, warrants caution for aggressive bears before positioning for any significant pullback from the previous day’s multi-week high.
Traders may refrain from taking directional positions around gold
Therefore, Strong follow-up to selling is needed to confirm that the recent rally from the vicinity of the $1,800 level, or the yearly low reached on February 28, has ended.. In the absence of relevant US economic releases, US bond yields could boost demand for the dollar and give the gold price some lift. Traders will follow broader market risk sentiment signals to take advantage of some short-term opportunities around XAU/USD, although a significant move in either direction seems unlikely.
Gold Price Technical Outlook
From a technical perspective, it is likely that the horizontal zone of $1,835 protect the immediate fall. Any further decline could find some support near the break zone. $1,822-$1,821ahead of the level of $1,810 and last week’s low, near the region of $1,805-$1,804. It is closely followed by the level of $1,800, which coincides with the 100-day simple moving average (SMA). A convincing break below this level will be seen as a new trigger for the bears and make gold prices vulnerable to further decline.
On the other hand, the area of $1,856-$1,858 seems to have emerged as an immediate hurdle, above which XAU/USD could rally to the 100-day SMA, currently around the $1,870. This should act as a pivot point, which if decisively breached will set the stage for a further appreciation move in the near term and allow bulls to retrace the level of prices. $1,900 with some intermediate barrier near the zone of $1,884-$1,886.
Gold 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.
