Gold Price Consolidates Ahead of Key US Events; Technical Analysis Points to Bearish Outlook

The price of GOLD remains flat as market participants await important events scheduled on the US calendar this week. The focus is on the upcoming Federal Reserve meeting on Wednesday, which prompted short positions in gold to be covered after the strong Nonfarm Payrolls jobs report. Currently, XAU/USD is trading at $1,958 and is consolidating within a triangle formation on the charts, as indicated by technical analysis.

According to analysts at TD Securities, there is growing recognition among GOLD traders that we are nearing “terminal rates,” which limits the bearish case for the precious metal. However, discretionary traders are cautious about deploying their capital into gold, aligning with the recent market shift away from pricing in rate cuts on a 12-month forward basis.

Nevertheless, the analysts explain that this reaction was driven by strong lagging indicators, while leading economic indicators still suggest that expectations for rate cuts may firm in the future, potentially supporting discretionary trader positioning in gold. CTA trend followers have recently reduced their exposure, which could limit the impact of a surprise rate hike during this meeting.

Meanwhile, market expectations of Fed tightening have decreased ahead of the FOMC decision. Analysts at Brown Brothers Harriman note that the market-implied probability (WIRP) indicates only a 60% chance of a 25 basis points hike, rising to nearly 100% for the May 2-3 meeting. They believe that the European Central Bank’s recent actions set a precedent for the Fed to follow suit and raise rates despite ongoing banking system tensions. Currently, only one 25 basis points hike is priced in, while three 25 basis points rate cuts are still expected by year-end. Given the persistent inflation, it is unlikely that an easing cycle will occur this year.

In terms of technical analysis, GOLD prices have exhibited a clear bearish trend, approaching the first target at $1,945.20. Further downside momentum could lead to a confirmation of the correctional bearish wave, targeting the next support level at $1,913.15.

Based on the bearish channel visible on the chart and the negative pressure from the EMA50, a breach of the levels at $1,966.90 and $1,977.25 would halt the expected decline and potentially initiate a reversal.

The expected trading range for today is between the support level of $1,935.00 and the resistance level of $1,970.00.