Gold Price Remains Depressed Around $1,860 Amidst US-China Tensions and Inflation Concerns

The price of gold (XAU/USD) has been stagnant around $1,860 as the US Dollar

Arslan Butt•Monday, February 13, 2023•2 min read

The price of GOLD (XAU/USD) has been stagnant around $1,860 as the US Dollar bounces back due to sour market sentiment, fueled by concerns surrounding US-China ties and anticipation for the US Consumer Price Index (CPI) in January. Here are some of the key factors influencing the current state of the GOLD market.

US-China Tensions Weigh on Sentiment

Investors have increasingly been feeling negative about trade between the US and China, especially since both countries are developing new technologies. Despite allegations of Chinese spying, the US General has denied these claims, stating that there is no reason to believe that the latest objects are of Chinese origin. Geopolitical concerns continue to persist and affect market risk profiles. While the US has destroyed four objects, China is preparing to re-launch their rocket, which could potentially have severe geopolitical implications.

Inflation Expectations Support Hawkish Fed Bias

The 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED) remain firm around monthly highs, which supports a hawkish Federal Reserve bias. As a result, the US Dollar is gaining favor, putting further downside pressure on the price of GOLD .

Philadelphia Federal Reserve President’s Comments Weigh on US Dollar Buyers

Despite the hawkish stance of the Federal Reserve, Philadelphia Federal Reserve President Patrick Harker has challenged the US Dollar buyers by pushing back the possibility of a Fed rate cut in 2023. While the Fed is not likely to cut rates this year, they may be able to in 2024 if inflation starts to ebb. It is not yet clear how this decision will impact the US economy but there are a number of reasons for its optimism. It could be beneficial for the US Dollar in the future.

Anticipation for the US CPI Data Release

GOLD traders are anticipating the US CPI data release on Tuesday, which could impact the future of the GOLD market. Should the data print strong numbers, hawkish Fed concerns may further depress the price of GOLD . On the other hand, if the US CPI data is softer than expected, policy pivot talks may arise, which could lead to a rebound in the price of gold.

Gold Technical Outlook

GOLD price (XAU/USD) has recently seen a temporary positive trade, providing an opportunity to retest the broken support of the bearish flag pattern, influenced by stochastic positivity. However, the bearish trend remains intact as long as the price is held below the key resistance level at $1,865.80. The EMA50 is also exerting negative pressure on the price, suggesting further downside movement.

Technical analysts expect that the next main target for XAU/USD is the $1,828 level. The expected trading range for today is between the support level at $1,830.00 and resistance level at $1,860.00.

Despite the temporary positive move, the trend for today remains bearish. Traders should watch for potential rejections at the resistance level of $1,865 to confirm the continuation of the bearish trend.

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ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.