Gold Faces a Hurdle; Why XAU/USD Could Resume the Downtrend - Forex News by FX Leaders

Gold Faces a Hurdle; Why XAU/USD Could Resume the Downtrend

Posted Monday, January 31, 2022 by
Arslan Butt • 3 min read
  • The market trading sentiment managed to stop its early-day declines, drawing some fresh bids ahead of the European session
  • Resistance remains at 1,793, and a bullish breakout at this level could lead the gold price towards 1,800
  • Gold is gaining support at 1,786 and currently trading at 1,788, with a bearish bias
The safe-haven metal, gold, failed to stop its previous long downward rally, falling for the fourth day in a row, renewing an intraday low of $1,786, as it headed into Monday’s European session. The prices of the yellow metal are expected to fall for the first time since September 2021. The declines could be linked to the ongoing upbeat market mood, which undermines safe-haven investments and leads to decreases in gold. The Federal Reserve took a more hawkish stance, indicating that it may hike interest rates more quickly than expected, in an effort to combat rising inflation. Thus, the hopes of a more aggressive Fed response, combined with rising US Treasury bond yields, has driven the US dollar to its highest level since July 2020. The dollar was bolstered even further by the release of the advance US GDP report on Thursday, which revealed that the world’s largest economy grew at an  annualised rate of 6.9% in the fourth quarter. The economy grew at am annual rate of 5.8% in 2021, the fastest in nearly four decades. Thus, the stronger dollar was another factor that put some pressure on the dollar-denominated commodity, gold. The XAU/USD pair is trading at 1,789.09, and consolidating in the range between 1,785.60 and 1,791.70.

Gold Rate Live

 

XAU/USD
Despite the worsening coronavirus conditions in Japan and the escalating requirements for hospital beds in Tokyo, the market trading sentiment managed to stop its early-day declines, drawing drew some fresh bids ahead of the European session on Monday. The reason could be tied to the positive news surrounding the market. Over the weekend, Australia’s most populous state announced relief measures for small and medium-sized businesses. On Sunday, the NSW government launched an AUD 1 billion package to help small and medium-sized enterprises cope with the Omicron wave. According to ANZ, on February, payments of up to AUD 5,000 per week will begin for firms with revenue of between AUD 75,000 and AUD 50 million.

Australia’s private sector credit rose by 0.8 percent month on month in December, compared to the expected 0.5 percent and the 0.9 percent of the previous month, boosting market optimism. Furthermore, recent upbeat inflation and jobs reports are keeping the RBA hawks hopeful. According to ANZ, “the (RBA) forecast for growth in wages is likely to point to a rate hike in the first half of 2023, as its central case, but in his statement on Tuesday and/or his speech the following day, Lowe is expected to admit, for the first time, that a move is possible in 2022 if the growth in wages comes through faster than forecast.”

Furthermore, the release of the Advance US GDP report, which revealed that the world’s largest economy grew at an annualised rate of 6.9% during the fourth quarter, boosted the market trading sentiment. Overall, the GDP grew by 5.8% in 2021, which was the fastest rate in nearly four decades. The upbeat market sentiment was considered a crucial reason for the drop in the price of safe-haven gold.

 

Gold (XAU/USD) – A Technical Outlook

On the technical side, the precious metal, gold, is gaining support at 1,786. Currently, it is trading at 1,788, with a bearish bias. Immediate support for the precious metal remains at 1,786, and a breakout below this level could open up further room for selling until 1,780 or 1,772.

The resistance remains at 1,793, and a bullish breakout at this level could lead the gold price towards the 1,800 or 1,810 mark. Consider staying bullish if the price is above 1,793, and vice versa.Good luck!

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