Gold Price Analysis: XAU/USD to Retrace Back, Brace for a Trading Signal - Forex News by FX Leaders
Gold - XAU/USD Chart

Gold Price Analysis: XAU/USD to Retrace Back, Brace for a Trading Signal

Posted Friday, January 28, 2022 by
Arslan Butt • 2 min read
  • Powell’s hawkish comments and the positive economic data both point towards the first rate hike coming in March
  • Advanced GDP for the quarter surges to 6.9%, against the forecast of 5.3%, supporting the US dollar
  • The precious metal, gold, is gaining support at 1,792, and currently trading at 1,799, with a bearish bias
Gold prices closed at $1,796.15, after hitting a high of $1,821.25, and a low of $1,790.80. Gold extended its decline on Thursday and fell sharply to its lowest level since January 10 amid the massive comeback of the US dollar. The US Dollar Index (DXY), which measures the greenback’s value against six major currencies, rose sharply to 97.29, which is its highest level since July 2020. The rally in the US dollar was driven by the robust US economic data, which strengthened the case for an interest rate hike by the Federal Reserve in March.

Gold Rate Live

XAU/USD

On the other hand, the US Treasury yield, on the benchmark 10-year note, also declined on Thursday, coming in at 1.78%. US economic growth accelerated in the last quarter, as the GDP posted its best performance in nearly four decades in 2021, which weighed on the gold prices. Another thing that is hurting gold’s safe-haven appeal is the rising price of the DXY, which soared to its highest level in 19 months.At 18:30 GMT, the advanced GDP figures came in. For the quarter, it surged to 6.9%, against the forecast of 5.3%, supporting the US dollar. The Advanced GDP Price Index for the quarter also surged, rising by 6.9%, against the anticipated 6.0% and supporting the dollar. The core durable goods orders remained flat, in line with the expectations of 0.4%. Durable Goods Orders fell to -0.9%, compared to the expectations of -0.6%, weighing on the dollar. The unemployment claims from last week remained unchanged at 260K. At 20:00 GMT, the Pending Home Sales dropped to -3.8%, against the projection of -0.9% and weighed on the US dollar. Most of the data from the US was favorable on Thursday, which ultimately added further to the losses in gold prices.

The remarks by Federal Reserve Chair Jerome Powell, along with the hopes that the central bank could raise interest rates without viagra-dosage-guide worrying about the strength of the US jobs market, indicate that they just want to get inflation under control. Powell refrained from discounting the possibility of the Fed raising interest rates every month, once the first pandemic-era rate hike takes place in March.

Powell’s hawkish comments and the positive economic data both point towards the first rate hike coming in March. This has pushed the dollar higher and weighed heavily on gold, because it will increase the opportunity cost of holding non-interest-bearing bullion.

While the Fed is hawkish, some analysts still believe that if inflation levels continue to grow in 2022, gold could see bullish bets coming in, as it is also used as a hedge against high inflation. So the risk-averse market mood will help bullion gain some strength if inflation continues to grow throughout this year.

Gold - XAU/USD Chart
Daily Technical Levels

Support           Resistance
1,784.21            1,814.66
1,772.28           1,833.18
1,753.76           1,845.11
Pivot Point:   1,802.73

Gold (XAU/USD) – A Technical Outlook

On the technical side, the precious metal, gold, is gaining support at 1,792. Currently, it is trading at 1,799, with a bearish bias. Immediate support for the precious metal remains at 1,792, and a breakout below this could open up further room for selling until 1,783 and 1,772.
The resistance remains at 1,815 (38.2% Fib), and a bullish breakout at this level could lead the gold price towards the 1,823 (50% Fib) mark. Consider staying bullish above 1,794 and vice versa. Good luck!
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