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Gold Technical Analysis: USD Strength is Weakening

The global stock sell-off continues as investors are shocked to realize that the Federal Reserve’s work to try to tame hyperinflation in the US is far from over. As is the case, the XAU/USD gold price collapsed to the psychological support area of $1,800 an ounce, the lowest price of gold during the 2023 trading year. It settled around $1816 an ounce at the time of writing.

Wall Street indices ended sharply lower, and risk-off sentiment extended to trading in Asia, with European indices also heading lower in early trade. An unexpected drop in retail sales in Germany in January added to the pessimistic picture, suggesting that consumers are showing a lot of caution, worried about what might be in the future for the economy amidst sharp inflation and rising rates.


In his testimony before Congress, US Federal Reserve Chairman Jerome Powell indicated that the hotter-than-expected readings of the labor market, business activity, and basic prices in January show that inflation is proving to be much stronger than what policymakers expected when they met. Last time to decide on monetary policy. Three new rate hikes in March, May and June now look likely, and the chances of a sharp 0.5% rise later this month are increasing if the February jobs snapshot and consumer price data do not show significant signs of slowing. Since borrowing costs will rise again, this will put more pressure on consumers and businesses.

It adds to concerns that the US economy will not fall like a feather into a mild recession but will move into a recession.

Investors had to make do with another diversion on the stock market rollercoaster and volatility is set to continue until central banks finally push to halt interest rate hikes. As Jerome Powell prepares to testify before the House of Representatives today, investors will be all ears for any further clues about the likely path of rates and the impact this will have on the robust US economy.

Recession warning lights have begun to flash more strongly in the bond markets, with the 2-year and 10-year Treasury yields reversing further. An inverted yield curve is seen as the canary in the coal mine in a recession, showing that it is much more expensive to borrow money in the short term than to borrow it in the long term. Investors usually want more rewards for holding their money for a longer period, but the two-year bond yields are over 5% while the ten-year yield is less than 4%.

Concerns about a hard landing for the United States are fueled by expectations of further fragility of the global economy, which has led to lower oil prices amid expectations of lower demand.

  • There is no change in my technical point of view, as the downward trend in XAU/USD gold prices increased in strength with recent selling operations.
  • This is after attempts to rebound upwards for five consecutive trading sessions.
  • We had recommended selling gold from the $1860 resistance level, prior to the recent move.
  • The bears are now ready to move the price of gold towards the psychological support level of $1,800, and then to the support levels of $1,788 and $1,770, respectively, which are sufficient to push the technical indicators towards strong oversold levels.

On the other hand, according to the performance on the daily chart below, the bulls will not have an opportunity to control the performance without moving towards the $1855 resistance level again. I still prefer to sell gold from every upward level. The market may remain under pressure from the strength of the US dollar until the US job numbers are announced on Friday.

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