- Gold rebounds towards $1,900, but not out of the woods yet.
- Aggressive Fed rate hike bets underpinned the USD and exerted some pressure.
- The formation of a bearish flag pattern is dictating more weakness ahead.
Gold Price is attempting a rebound from two-month lows of $1,886, closing in on the $1,900 mark this Wednesday. The market mood remains upbeat despite the ongoing EU-Russia energy conflict, in the face of the Ukraine war. The US dollar is pulling back from two-year highs amid the improving sentiment, offering a much-needed respite to XAUUSD bulls. The negative sentiment seen around the US Treasury yields also aids the rebound in the non-yielding Gold Price.
Despite the retreat in the dollar, persistent concerns over global growth, China’s lockdowns and more aggressive Fed rate hikes are likely to keep the demand for the greenback intact, which could limit gold’s rebound. As per the CME Fed watch tool, Fed is expected to raise rates by half a percentage point at each of its next two meetings. The forecasts from the economic indicators are indicating that the economy is passed from the ultra-loose policy environment and a tight stance on liquidity distribution will remain the talk of the town. This, in turn, was seen as a key factor that acted as a headwind for the non-yielding yellow metal.
Looking ahead, in absence of top-tier US economic releases, the broader market sentiment and Fed expectations will continue to influence the USD and impact the gold price. Investors also remain focused on Thursday’s US Gross Domestic Product (GDP) numbers. A preliminary estimate for the yearly US GDP at 1.1%, advocates an underperformance in comparison with the prior print of 6.9%.
Gold Technical Analysis
Gold Price Chart: Daily
Technically, Gold Price breached the March 29 lows of $1,890 but found bids just above the end-February lows near $1,880.
Even though XAUUSD is bouncing back towards the $1,900 mark, the 14-day Relative Strength Index (RSI) keeps pointing lower below the midline, suggesting that any recovery attempts are likely to remain shallow.
If bulls succeed in recapturing $1,900 on a sustained basis, then Tuesday’s high of $1,911 could be retested.
Further up, the $1,950 psychological level will be closely followed by XAU bulls.
On the downside, only a daily closing below the $1,890 support could initiate a fresh downswing towards the February 24 lows of $1,878.
Sustained weakness below the latter will expose the rising 100-Daily Moving Average (DMA) at $1,875.
It’s worth mentioning that the 21-DMA is set to cross the 50-DMA for the downside, which if materialized will revive the selling interest in Gold Price.