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Gold (XAU/USD) Technical Analysis: Gold Price Awaits Stimulu


Reports recently showed more strength than expected in everything from the labor market to retail sales to inflation itself, sparking fears that the US Federal Reserve will have to get tougher on interest rates. 

  • Amid a temporary halt to the gains of the US dollar, the gold (XAU/USD) price gained a positive momentum to rebound to the upside, stable around the level of $1847 an ounce.
  • This happened after strong selling operations that the gold market was exposed to last week, with losses towards the support level of $1819 an ounce, the lowest price of XAU/USD for nearly two months.
  • The downward momentum of prices increased after the return of strong expectations for the future of US central bank policy tightening in light of strong and positive readings of the US economic sectors.
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At the beginning of trading this week. Stocks rose mostly in European and Asian markets after Wall Street ended another bumpy week marked by unease over inflation expectations and interest rates. By performance, the German DAX index rose 0.1% in early trading to 15494.14, and the CAC 40 index in Paris rose 0.1% at 7345. Britain’s FTSE 100 Index rose 0.2% to 8016.05. S&P 500 and Dow Jones Industrial Average futures were down 0.1%.

On the other hand, China left the benchmark lending rate, which is the main interest rate for a loan, unchanged as expected. The 1-year rate has been maintained at 3.65% while the 5-year rate is 4.3%. In Asian trading, Hong Kong’s Hang Seng rose 0.8% to 20,886.96 while Shanghai Composite jumped 2.1% to 3,290.34. The Nikkei 225 index in Tokyo rose 0.1 percent to 27,531.94. India’s Sensex fell 0.5% to 60,702.28. South Korea’s Kospi Index rose 0.2% to 2455.12 and Australia’s S&P/ASX 200 rose 0.1% to 7351. Shares were lower in Southeast Asian markets, except for Bangkok.

In general, recent economic data has revived fears that inflation in the United States of America is not subsiding as quickly as hoped. This has shaken hopes that the Federal Reserve might make it easier to raise interest rates and avoid tipping the economy into recession. This added to the turmoil in Wall Street markets after starting the year with strong gains. In last Friday’s trading session, the S&P was down 0.3% and the Dow Jones Industrial Average was up 0.4%. The Nasdaq Composite fell 0.6%.

Reports recently showed more strength than expected in everything from the labor market to retail sales to inflation itself, sparking fears that the US Federal Reserve will have to get tougher on interest rates. That added flexibility reassured investors that the economy could avoid the worst of a recession.

American jobs are still plentiful, and shoppers are still spending to support the most important part of the economy, which is consumer spending. This has helped the S&P 500 hold on to gains of 6.2% since the start of the year. The fear is that if inflation proves to be more consistent than expected, it could prompt the Fed to become more aggressive than the market is. These moves were most evident in the bond market, where yields have risen this month on expectations that the Federal Reserve will be more steady. And this week, Thursday’s updated estimate of U.S. economic growth in October and December will provide more information about how businesses and consumers are doing. Expectations are that growth will have slowed to 2.8% or 2.9% qoq, down from 3.2%.

Gold (XAU/USD) Forecast

According to the performance on the daily timeframe chart, the gold price is still on a downward track, and despite the technical indicators reaching oversold levels. If the US dollar’s strength continues, the price of gold may be subject to a move towards the next stronger support levels at $1824 and $1800, respectively. It is better to buy gold without the risk of waiting for an upward correction.

On the other hand, over the same time period, the outlook for the gold price will not change without returning to the vicinity of the $1885 resistance level again. The price of gold today will be affected by the level of the US dollar price and the extent to which investors are willing to take risks, as well as the reaction from the announcement of the readings of the manufacturing and services sectors of the global economies.

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