- Gold (XAU / USD) rallied to near its 50 and 200 DMAs after a brief dip to $ 1,770 on Tuesday.
- Prices were hit Tuesday by aggressive comments from Powell and traders will be watching for Day 2 of his testimony on Wednesday.
Gold prices (XAU / USD) They have recovered from lows on Tuesday, Wednesday and are currently trading with gains of around 0.75% on the session modestly below $ 1,790. That means the pair’s prices are currently trading just below the 50- and 200-day moving averages, which are near $ 1,792, and trading near the middle of the $ 1,770 to $ 1,810 range.
Recent price action
To recap recent price action, prices for the pair on Tuesday fell back from a high of $ 1,810 to hit session lows of $ 1,770, in line with last week’s lows. Aggressive comments from Fed Chairman Jerome Powell, who essentially signaled an intention to go ahead with monetary normalization plans despite the economic risks related to Omicron, spurred the downside at the time. Gold traders await further comment from Fed Chairman Jerome Powell on the second day of his congressional testimony, which will begin at 3:00 PM GMT after the release of the November ISM Manufacturing PMI survey. The survey is expected to point to continued underlying strength in the manufacturing sector and the US economy, but also to high inflationary pressures and the impact of shortages.
Gold prices saw no reaction to ADP’s release of slightly stronger-than-expected national employment figures for Friday, which should solidify expectations that the official labor market survey will show strong job growth in November. Markets suspect that this week’s big list of US data should validate Powell’s bullish tone on the state of the economy and should support the case for an acceleration of the Fed’s QE reduction plans.
Omicron uncertainty
High levels of uncertainty about how the Omicron – Covid-19 variant will affect the global economy is keeping XAU / USD prices low near its 50 and 200 DMAs for now. But if the new variant turns out to be “super soft” as the first reports (anecdotal medical) suggested, the Fed’s expectations of tightening for 2022 could rise again. This could be a bearish catalyst for gold and send it below recent lows in the $ 1,770 zone. In a bearish scenario, the $ 1,760 level would be the next target in sight and a break below that would open the door for a drop to $ 1,720, September lows.
Technical levels
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