Gold Technical Analysis: Gold Price Tries to Maintain Gains

  • After three consecutive trading sessions, the XAU/USD gold price was subjected to profit-taking sales.
  • After testing the resistance level at $1929 an ounce, the highest price in nine months, it retreated following the recent selling operations towards the $1896 level.
  • It settled around the $1912 resistance level, which confirms that the bulls continue to control the trend as long as the US dollar is weak.

Yesterday, US stocks ended off session lows after weak economic data renewed concern about the outlook for growth and corporate earnings. Treasury yields rebounded, while the dollar rose on deteriorating risk sentiment.

According to trading, the S&P 500 index fell by 1.6 percent, the worst decline in one month, while the Nasdaq 100 index broke higher for seven days, after reversing gains that exceeded 1 percent. Earlier, stocks rose as Treasury yields fell across the curve on bets that weak data will prompt the US Federal Reserve to change its tightening policy. However, two Fed officials repeated calls for more increases even after more signs that the economy is declining and inflation subsiding.

Results of economic data

The growth in producer prices decreased last month more than expected, and the decline in US retail sales exceeded estimates, according to reports released on Wednesday. Meanwhile, commercial equipment production fell, with factory output dropping to cap the weakest quarter for manufacturing since the start of the pandemic. The consumer is losing steam and business investment is plummeting, concern has increased that the economy may be approaching recession.

On the corporate news front, Microsoft said it plans to cut 10,000 jobs, and is taking steps to deal with the increasingly bleak outlook. Bank of America Corp. began telling executives to stop hiring except for the most vital jobs. Cryptocurrency startup Genesis Global Capital is reportedly laying the groundwork to file for bankruptcy.

Treasury yields have moved up across the curve, with the 10-year note yield dropping about 18 basis points to 3.37 percent in afternoon trading. And financial markets increased bets on the easing policy and bet that the Federal Reserve rate would peak just below 4.9 percent, compared to the current range of 4.25 percent to 4.5 percent.

While markets are pricing in a step down in the rate hike cycle, two Fed hawks have closely echoed calls for more increases. St. Louis Fed President James Bullard said policy is "almost" in restricted territory but not quite. Pollard said in an online interview in the Wall Street Journal that policy should remain on the "tighter side in 2023," noting that he had projected a rate range of 5.25 percent to 5.5 percent by the end of this year in the Fed's point chart to expectations.

Cleveland Federal Reserve Bank President Loretta Mester said in an interview with The Associated Press published Wednesday that the Fed needs to "hold on," but didn't say how big a hike she'd prefer when officials meet Jan. 31-2. Feb 1. Philadelphia Fed President Patrick Harker reiterated his view of raising interest rates in quarter-point increments "in the future."

XAU/USD gold price forecast today:

There is no change in my technical point of view for the performance of the XAU/USD gold price. The general trend is still bullish and stability is above the psychological resistance at $1900 an ounce, confirming the bulls’ control over the trend.

At the same time, the technical indicators moved towards overbought levels, unless gold gains more momentum or the price returns. The US dollar is on the rise, as the XAU/USD gold price may be exposed to profit-taking sales at any time. This could push prices quickly to the $1879 and $1858 support levels, respectively. There will not be a first break of the current general trend without moving towards the support level of $1820 an ounce. If gold gains more momentum, a move towards the top of $1955 an ounce cannot be ruled out.

Gold

Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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