Gold prices hover near $2,020 amid market fluctuations


Gold prices have shown modest fluctuations as market activities resume, maintaining a position just above the $2,020 mark during Asian trading hours.

From a technical standpoint, the swing low from last week, around the $2,015 mark, is likely to serve as immediate support before the psychological barrier of $2,000. Negative traction on the daily chart's oscillators signals that a convincing break below the $2,000 threshold could trigger bearish momentum, potentially leading to further declines.

In such a scenario, the price of gold may accelerate its descent towards the 100-day Simple Moving Average (SMA), currently situated around the $1,988 zone, before targeting the crucial 200-day SMA in the $1,966-1,965 region.

Conversely, the 50-day SMA around $2,033 could pose an immediate obstacle, followed by last week's swing high near $2,044-2,045. Beyond that lies the $2,065 region, representing the monthly peak. A clear breach of this level could invalidate the short-term negative outlook.

In a bullish scenario, the Gold price could potentially gain momentum towards retesting the year-to-date peak near $2,078-2,079 recorded in January. Further upward movement may propel XAU/USD toward the $2,100 mark, aiming for the next significant resistance around the $2,120 region.

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Gold faces challenges amid rising treasury yields

The recent upward trend in U.S. Treasury yields, fueled by positive economic indicators from the U.S. and hawkish comments from Federal Reserve officials, has slightly tempered the momentum for the precious metal. The generally optimistic market sentiment is also contributing to a diminished appeal for gold as a traditional safe-haven asset.

Market restraint is further amplified by traders' hesitance amid uncertainties surrounding the Fed's interest rate trajectory for the upcoming year. This cautious approach is expected to persist until crucial U.S. consumer inflation data is released.

Market participants are increasingly acknowledging the Fed's commitment to sustaining elevated interest rates, underpinned by the enduring strength of the U.S. economy. This collective realization, coupled with recent comments from Fed officials advocating for a cautious approach to rate cuts, creates additional obstacles for gold.

Dallas Fed president Lorie Logan and Atlanta Fed president Raphael Bostic have emphasized the need for tangible progress on inflation before contemplating rate reductions. These remarks echo sentiments expressed by other policymakers, including Chair Jerome Powell, who have indicated a reluctance to initiate rate reductions hastily.

Meanwhile, revised data from the Labor Department, showing a slight uptick in consumer prices, underscore the inflationary pressures and add complexity to the Fed's rate-cut calculus.

Potential influences on gold's valuation

As the trading week kicks off, the subdued activity in gold prices is attributed partly to the holiday closures in Japan and China, contributing to a lack of significant market movement.

The release of Consumer Price Index (CPI) figures on Tuesday is anticipated to provide insights into the Fed's rate adjustment strategy, potentially influencing the trajectory of the U.S. dollar and, subsequently, impacting gold's valuation.

Throughout the week, any potential rebounds for gold may be capped by the easing geopolitical concerns in the Middle East.

"Positioning is neutral, and if the data deteriorates softening the dollar and deepening U.S. rate cut bets, then gold will shine again,” said Kyle Rodda, a financial market analyst at Capital.com, as quoted by Reuters.

“The big risk this week is consumer price index (CPI). If that comes in hot, another test of $2,000/Oz level could be on the cards"

In addition, market participants are also eyeing retail sales data scheduled for Thursday and producer price index (PPI) data on Friday.