Gold Technical Analysis: Facing New Buying Levels

The price of gold extended its decline after US Central Bank Governor Jerome Powell said in prepared remarks that the Federal Reserve is ready to increase the pace of raising US interest rates if necessary. Gold market losses extended to the support level of 1813 dollars an ounce, its lowest in a week. US dollar and Treasury yields advanced, affecting bullion prices, which fell as much as 1.4%, the biggest decline since February 3. XAU/USD gold price is poised for further collapse.

Powell added that the US central bank is likely to raise interest rates higher than previously thought, and that he is ready to accelerate the pace of increases if economic data calls for it.

"Recent economic data came in stronger than expected, indicating that the final level of interest rates is likely to be higher than previously expected," Powell said also Tuesday in prepared testimony before the Senate Banking Committee. Until faster tightening is warranted, we will be prepared to increase the pace of rate hikes.”

Faced with pressure from rising interest rates, strong demand from central banks has helped support prices in recent months. Yesterday's data showed that China increased its gold reserves for the fourth month in February, joining other Asian countries in increasing their holdings as the dollar's strength waned. Turkey has also been a major buyer recently.

For his part, Morgan Stanley said in a note: “For 2023, we need to consider both macro factors and the demand side, but the new trend line indicates that gold is likely to be more reactive to changes in returns than it was in 2022.” Central bank purchases may slow, but demand for jewelry and technology could see a boost from China's reopening.

XAU/USD gold price forecast today:

  • The downward trend in gold prices, XAU/USD, increased in strength with yesterday's selling operations.
  • This is after attempts to rebound upwards for five consecutive trading sessions.
  • We had recommended selling gold from the resistance level of $1860 an ounce, prior to yesterday's 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 level up. The market may remain under pressure from the strength of the US dollar until the US job numbers are announced by the end of the week.

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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.