- Gold could be approaching a lower low, but the hourly time frame is key.
- The hourly support structure is protecting a breakout to test the bullish commitments at 1,800.
Gold was up around 0.57% on the day as the price held from a technical confluence support area on the daily and hourly time frames.
The XAU / USD has traveled from a low of $ 1,808.86 to a high of $ 1,828.83 so far this day.
The dollar remains firm around the highs for the week on a double whammy from inflation data that is giving the market some fresh concerns.
First, the previous day’s consumer price index boosted US yields as US consumer prices rose the most in nearly 12 years in April.
Then on Thursday, the US Department of Labor reported higher producer prices in April, further evidence that inflation is rising in the United States.
The producer price index rose 0.6% in April after rising 1.0% in March. In the 12 months to April, the PPI soared 6.2%. That was the biggest year-on-year increase since the series was renewed in 2010 and followed a 4.2% jump in March.
Markets are now betting that the Federal Reserve could raise interest rates sooner than the bank has predicted.
However, the vice president of the US Federal Reserve, Richard Clarida, said that weak job growth and strong inflation in April will not have altered any monetary policy plan at the Fed.
Yesterday’s inflation footprint fueled market fears of runaway prices, with a chorus of investors hoping that the Fed’s super-dovish stance, combined with a massive global fiscal boost, would translate into a policy error. that would cause a strong overshoot, ” TD Securities analysts have explained.
In this sense, it should be noted that gold is performing poorly in periods of high inflation. CTA’s short hedging has helped prices rise, but the yellow metal will have a difficult time moving forward without further support from real rates. ”
Finally, analysts cautioned that they “estimate that algorithmic trend followers could be affected if prices close below $ 1,775 / oz, particularly as the close in India saps the appetite for the physical metal.”
Gold technical analysis
Meanwhile, from a technical position, the price of gold has moved into the 10-day EMA within the solid uptrend and could still attract buyers in what would be a correction from the previous weekly and daily bullish momentum.
We have already seen the average 50% reversal at 1,808, today’s lows.
A deeper move and a break below the 10-day EMA opens the risk of a test of the next confluence zone at the 61.8% Fibonacci retracement reaching 1,800 and aligning with the April 22 highs as support structure.
On the hourly chart, this will imply a breakout of two critical supports and will drag the bulls and bears into a bar fight scenario.
The bears will want to avoid that trap and will wait for a discount if the price breaks below 1.815, fading the correction from the breakout:
As you can see, there is a liquidity gap below the second support structure that bears will want to exploit on a breakout of the structure.
Lower time frames, such as the 15 or 5 minute charts, offer a vantage point in such scenarios where price action can be fast, looking for smaller price change increments and a bearish structure for an entry point. optimum.
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