Introduction
For the second day in a row, gold encountered resistance on Wednesday at $2,200, but it recovered and mostly reversed its daily losses. The US 10-year T-bond benchmark yield is still steady at 4.2%, which is impeding the bullish momentum that is developing for XAU/USD.
Technical Synopsis
Given the significant increase that has taken place since the beginning of the month, the range-bound price action that has been in place for the last two weeks or so technically may be characterized as a bullish consolidation phase. Furthermore, by steadfastly holding their positive zone, oscillators on the daily chart are bolstering the potential for a future upside breakout. The price of gold will be able to retest the record high, which was touched last week in the $2,223 zone, if there is some follow-through buying over $2,200. This would validate the optimistic setup.
On the other hand, any corrective slide should first find some support in the $2,164–2,163 regions before proceeding to the $2,156-2,155 zone and the $2,147–2,146 regions. A big breach of the latter might trigger severe technical selling and drive gold prices closer to the next major support zone, which is situated between $2,128 and $2,127, and eventually to the $2,100 round figure. The previously mentioned handle should provide the XAU/USD with a strong base; if it is violently broken, it will indicate that the market has peaked soon and allow for additional losses.
Basic Synopsis
The price of gold (XAU/USD) is stuck in a narrow trading range, below $2,200, during Wednesday’s early European session as it still fails to gain any meaningful impetus. Right now, traders are apprehensive, preferring to wait for further information regarding the Federal Reserve’s (Fed) policy track before placing new directional bets. As a result, everyone will be watching intently for the US Personal Consumption and Expenditure (PCE) Price Index to be released on Friday. The news ought to play a major role in driving up demand for US dollars (USD) and providing the unwavering yellow gold with a lot of energy.
The Federal Reserve’s announcement last week that it still intends to cut interest rates by 75 basis points in 2024 is another factor driving up gold prices. However, the US Durable Goods Orders data released on Tuesday provided support for the idea that the country’s economy is doing well, albeit slightly better than projected. Moreover, sticky inflation could force the Fed to maintain higher interest rates for a longer period of time, maintaining the high yields on US Treasury bonds. Thus, limiting the rise in the XAU/USD pair, the US Dollar (USD) falls and returns to the multi-week high it reached last Friday.
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