Gold Trades Sideways at $1,816 – Brace for a Breakout

Gold (XAU/USD) is hovering around $1,816 as traders remain divided on the precious metal’s outlook due to its status as a hedge against inflation. As a result, commodity prices pay little attention to broad risk aversion despite being pressured during the early Asian session on Thursday.

The Eurozone’s record high inflation joins a 20-year high in the UK Consumer Price Index (CPI) and Canada’s upbeat price pressure data to fuel market concerns that higher prices would weigh on growth. The same can be seen in the major banks’ recently lowered US Gross Domestic Product (GDP) forecasts.

The recent rush of the major central banks, led by the Fed towards higher rates to ward off the negative effects of inflation on the economy has added to the risk-off mood. Doubts that the lack of easy money isn’t appropriate at a time when supply chains are constrained appear to strengthen the rush to risk safety.

Other Factors That Support Gold Prices

An increase in covid cases in mainland China and new virus-led activity restrictions in Tianjin, the port city near Beijing, are also weighing on the market’s mood. The headlines about the Russia-Ukraine crisis were similar, with the West bracing for more sanctions against Moscow for the invasion of Kyiv.

Wall Street benchmarks were in the red, while US 10-year Treasury yields fell 11 basis points (bps) to 2.88 percent by Wednesday’s North American trading session. It’s worth noting that the S&P 500 Futures are currently down 0.60 percent intraday.

Although gold traders are divided about the metal’s traditional safe-haven status, a stronger US dollar puts downward pressure on GOLD prices. As a result, in addition to the risk catalysts mentioned above, today’s second-tier US data are essential in determining short-term XAU/USD moves.

Gold Technical Outlook

Gold price bounced bearishly after testing the resistance of the bearish channel that appears on the chart, keeping the bearish trend scenario valid and active on an intraday and short term basis, backed by the pressure gradient formed by the EMA50. We assume that the way is open to head towards our primary awaited target of 1780.25.

Holding below 1850.00 is critical to continuing the proposed bearish wave, with a break of 1780.25 extending the bearish wave to 1765.00 as the next negative target.

Today’s trading range is anticipated to be between 1785.00 support and 1825.00 resistance. Good luck!

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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