I have often mentioned the possibility of profit-taking selling of the XAU/USD (gold) price after its recent strong gains on the impact of the weakness of the US dollar, reaching the resistance level of $2048 an ounce. The price’s inability for two trading sessions to cross helped profit-taking sales in pushing the gold price XAU/USD towards the support level of 1981 dollars an ounce, before settling around the level of 1998 dollars an ounce, at the time of writing the analysis.
Gold futures fell, but ended the week's opening trading session above $2,000. The price of the yellow metal has repeatedly failed to surpass its August 2020 record high of $2,069.40, although market analysts say gold prices still have plenty of support. With the uncertainty in the financial markets and the global economy, the US currency will play a decisive role in the performance of gold.
In general, the price of gold did not change nearly last week, but it increased by about 10% since the beginning of the year 2023.
In the same performance, silver prices, the sister commodity to gold, struggled to stay above the $25 level at the beginning of this week's trading. Silver futures fell to $25.10 an ounce. In general, the price of white metal increased by 0.4% last week and rose by about 4% this year 2023.
Gold prices extended the sell-off last week and briefly fell below the crucial psychological level of $2,000. The reason is that the price of the US dollar has recovered. It got support in the comments of some Fed officials who claimed that the US central bank needs to keep raising interest rates because inflation is still too high.
A stronger profit is bad for dollar-denominated commodities because it makes them more expensive for foreign investors to buy.
The US Dollar Index (DXY), which measures the greenback's performance against a basket of other major currencies, rose to 102.16, from an opening of 101.57. The index fell 0.4% last week and is down 1.32% since the beginning of the year 2023. But responsibility is showing signs of renewed life.
Meanwhile, market analysts say this neutrality is good news for prices as it could lead to a new bullish rally and could retest all-time highs. With the Federal Reserve and other global central banks at or near peak interest rates, the prospect of lower interest rates could be good news for gold prices. Gold is usually sensitive to movements in interest rates because they affect the opportunity cost of holding non-yielding bullion.
The US Treasury market was mostly higher across the board, with the 10-year yield up more than seven basis points to 3.595%. One-month yields fell 23.5 basis points, while 30-year yields jumped nearly seven basis points, to 3.804%.
In other metals markets, copper futures fell to $4.065 a pound. Platinum futures rose to $1061.50 an ounce. Palladium futures rose to $1,560.50 an ounce.
XAU/USD (Gold) Technical Outlook:
The return of XAU/USD (gold) price around and above the psychological resistance of $2000 an ounce will guarantee the bulls the opportunity to continue controlling the trend. The success of breaching last week’s resistance of 2048 dollars an ounce will support the strongest move to breach the record and historical price of gold ever.
On the other hand, the continuation of the recent selling operations may give the bears the opportunity to move towards the support levels of 1959 and 1938 dollars, and the last level is important to confirm that the trend has turned bearish. The price of gold this week will be affected by the level of the US dollar, the reaction to China's data, and the policy signals of global central banks, especially the US Federal Reserve.
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