Gold Finds Fresh Low Amidst Hawkish Fed, Risk-Off Mood; Economic Concerns Loom
The Gold Price (XAU/USD) recently experienced a decline to a five-month low, briefly reaching around $1,890, before entering a phase of consolidation. Market participants are actively seeking additional insights to determine the potential continuation of the preceding downtrend. This decline is driven by apprehensions stemming from a hawkish Federal Reserve (Fed) stance and an overall risk-off sentiment in the market.
Several factors contribute to this scenario. The combined fears of an economic slowdown in China and softer growth figures in developed economies have joined forces with stronger US data to fuel a surge in US Treasury bond yields. This, in turn, has bolstered the US Dollar, placing downward pressure on the XAU/USD. Notably, the US 10-year Treasury bond yields have reached the highest level since October 2022, currently hovering around 4.29%. This heightened level of bond yields has triggered concerns of an economic deceleration and has led to a retreat from riskier assets while concurrently strengthening the US Dollar in late 2022. Moreover, downbeat economic projections from Fitch Ratings further compound the negative sentiment and exert pressure on Gold Prices.
As the current landscape lacks major data or events, Gold Price movements may be confined to consolidation at multi-day lows. However, the pervasive risk aversion sentiment coupled with firmer yields can sustain the US Dollar’s strength. This could lead to a potential rebound in the XAU/USD, unless a robust positive catalyst arises that could weaken the Greenback and uplift market sentiment.
The Technical Confluence analysis reveals key levels to watch in the Gold Price’s trajectory:
Resistance Confluence: The $1,917-18 resistance confluence is significant, encompassing the Fibonacci 161.8% on the daily chart, the 200-Hour Moving Average (HMA), and the Pivot Point one-month S1.
Support Turned Resistance: The Gold Price’s sustained trading below the $1,905 support, now turned resistance, is noteworthy. This level converges the 200-Day Moving Average (DMA), the 50-DMA, and the middle band of the Bollinger Bands on the four-hour (4H) chart.
Immediate Downside Restraint: The $1,888 level, inclusive of the lower Bollinger Band on the hourly chart and the Pivot Point one-week S2, acts as a buffer against immediate downside pressure.
Further Downside Potential: If the Gold Price continues to weaken, it could encounter the $1,870 support, including the Pivot Point one-day S3. The Pivot Point one-day S2 might come into play around $1,882 during a decline.
Bearish Trajectory: Should the Gold bears persist below $1,870, the possibility of a slide towards the early March swing high around $1,858 gains traction.
As the Gold Price navigates these intricate dynamics, market participants are closely monitoring the interplay between economic indicators, geopolitical factors, and market sentiment to gauge its trajectory in the near term.
