XAU / USD struggles to gain traction ahead of key central bank meetings

• The price of gold gains some positive traction on Monday and moves away from the lows of more than a week.
• Stagflation risk concerns turn out to be a key factor benefiting the yellow metal.
• The rally lacks bullish conviction ahead of central bank events this week.

The price of oro (XAU / USD) It has moved higher during the early part of the trading action on Monday and has moved away from the lows of more than a week touched the previous day, although it has lacked any continuation. At the time of writing, the precious metal regresses some of its motion and remains virtually unchanged around the $ 1,785 level.

Data released on Friday showed that the Fed’s preferred inflation gauge, The core PCE price index remained stable near 30-year highs, suggesting that consumer cost pressures are taking hold. This validated the expectations that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation and weighed heavily on the non-performing yellow metal. Apart from this, a strong pickup in demand for the US dollar it put additional pressure on the dollar-denominated XAU / USD and contributed to Friday’s sharp intraday decline.

Meanwhile, fears about a faster-than-expected rise in inflationary pressures, coupled with signs of a global economic slowdown, have been fueling concerns about the risk of stagflation. This, in turn, was seen as a key factor helping the XAU / USD find some support above the $ 1,770 level and gain some positive traction on the first day of a new week. Having said that, a modest USD strength has limited any significant gains for gold, At least for the moment. Investors also seem reluctant to open new positions and may rather wait on the sidelines before this week’s major central bank events. The Reserve Bank of Australia will publish its monetary policy update on Tuesday, while the Fed and Bank of England they are scheduled to announce their decisions on Wednesday and Thursday, respectively.

Despite the pessimistic stance of the RBASaying that the conditions for a rate hike are unlikely to be met before 2024, money markets have priced three rate hikes by the end of 2022. Furthermore, market participants seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Investors have also been betting on the prospects for a BoE rate hike imminent by the end of this year. The optimistic outlook for central banks should continue to act as a headwind for gold, justifying some caution for the bulls. This makes it prudent to wait for a strong continuation buy before positioning for any significant bullish movement. Market participants are now looking forward to the release of the US ISM Manufacturing PMI for some boost at the start of the American session today.

Gold technical perspective

From a technical perspective, the repeated failures near the $ 1,810-12 resistance zone and the subsequent drop on Friday suggest that the recent positive move has been exhausted. This could have already set the stage for a dip to test the support area of 1.762$. The corrective pullback from the multi-week highs could extend further towards the October monthly lows, around the area of 1.745$.

On the other hand, any significant recovery now appears to face stiff resistance near the 1.790-92$ (confluence of the 100/200 day SMA) and remain capped near the level of 1.800$. A sustained force above this region could allow the bulls to make a further attempt to break the barrier of the 1.810-12$ and push gold prices into the supply zone of 1.832-34$.

Gold technical levels