Gold (XAU/USD) Technical Analysis: Gold is Holding Onto its Gains

In the commodities complex, the price of gold bounced back strongly, rising more than 2% last week. 

  • XAU/USD (gold) futures ended Monday's session flat after snapping a four-week losing streak.
  • According to trading, the price of the yellow metal settled above the $1850 resistance level, as investors prepare for the testimony of US Federal Reserve Chairman Jerome Powell before Congress on Tuesday and Wednesday, and important economic data.
  • There may be a big move in gold prices by the end of the week.

At the beginning of this week's trading, XAU/USD (gold) prices rose to the $1858 resistance level, before stabilizing around $1846 an ounce, at the time of writing. Gold prices began to achieve weekly gains of about 1.5%, in addition to the annual increase during 2023, which it achieved by more than 1%.

In the same performance, silver prices, the sister commodity to gold, struggled to stay above the level of $21 an ounce at the beginning of trading this week. Silver futures fell to $21,095 an ounce. The price of the white metal is also coming off a weekly jump of 1.75%, but is still down nearly 13% this year so far.

Although gold found some support due to the weakness of the US dollar, it was relatively flat. Investors expected two days of testimony from US Governor Jerome Powell before the Senate Banking Committee and the House Financial Services Committee on Tuesday and Wednesday.

Investors are waiting to see if the Fed will offer some insights on interest rates and how it plans to fight inflation. And in the short term, Fed Chair Jerome Powell's comments will be huge drivers of price movements for the precious metal.

Also according to trading, the US Dollar Index (DXY), a measure of the US currency against a basket of other major currencies, decreased by 0.18% to 104.33 from an opening of 104.53. The index was almost flat last week but is up 0.8% year-to-date in 2023.

As is well known, a weak US dollar is good for dollar-denominated commodities because it increases the cost of buying them for foreign investors.

And on the other hand. US Treasury yields were mostly positive on Monday, with the benchmark 10-year yield rising nearly 2 basis points to over 3.98%. One-month bond yields fell 0.8 basis points to 4.678%, while the 30-year yield rose 2.7 basis points to 3.914%.

The gold market is generally sensitive to fluctuations in interest rates because they can affect the opportunity cost of holding non-yielding bullion. Commenting on this, Robert Rowling, market analyst at Kinesis Money, said that: “In this environment of rising interest rates, the gold market becomes less attractive to investors due to its lack of yield, so the owners of the precious metal hope that Powell will not take a more hawkish tone than his fellow committee members.” 

As for other metal commodity prices, copper futures settled at $4.07 a pound. Platinum futures contracts settled at $979.70 an ounce. Palladium futures fell to $1428.00 an ounce.

Investors entered the new trading week in high spirits, as a calmer tone in bond markets helped lighten moods in other asset classes. Stock markets and gold prices enjoyed a rally on Friday and tried to extend those gains on Monday, spurred by a strange decline in US yields. Although the latest ISM non-manufacturing survey was strong on all fronts - pointing to accelerating US economic growth, persistent inflationary pressures, and a buoyant job market - bond yields still fell in the aftermath.

It was a strange reaction, which some market participants blamed on profit-taking after a sharp rise in yields over the past month. Yields act as a force of attraction in financial markets because they are essentially the price of money. The lower the returns, the more attractive bets become like stocks and vice versa. This dynamic helps explain why the S&P 500 was up 1.6% on Friday, while the Nasdaq was up 2%.

However, this is a challenging environment for stocks.

In the commodities complex, the price of gold bounced back strongly, rising more than 2% last week. In classic fashion, the precious metal has benefited from declines in real yields and the US dollar, although it will be difficult for that advance to sustain for long in a system where the Fed is expected to remain on the ropes for much longer.

XAU/USD (gold) Forecast

So far, the general trend of XAU/USD (gold) price is moving within an ascending channel that lacks strong momentum to continue moving within that channel, and this requires moving toward the $1872 and $1890 resistance levels, respectively. This will depend on the course of the US dollar price and the sentiment of investors and markets after important and influential events and data. this week. On the other hand, according to the performance on the daily chart below, gold price breaking the support level at $1826 an ounce will support the bears' broader control over the trend again.


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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.