Keeping A Bearish Bias in Gold This Week, As Uncertainties Persist

Posted Tuesday, August 22, 2023 by
Skerdian Meta • 2 min read

Gold has been bearish since March and after a slight retreat in July, sellers came back and the decline resumed again, this time becoming even more straightforward as the h4 chart above shows. Concerns about a potential recession in the US economy have diminished due to the presence of robust labor market conditions and a strong upward trajectory in consumer spending, bolstered by consistent wage growth. This is helping keep the FED more hawkish and recent forecasts regarding the Federal Reserve’s (Fed) stance on interest rates indicate that the central bank intends to maintain interest rates at elevated levels until March 2024.

The 20 SMA (gray) has been acting as resistance at the top for XAU/USD, although the downward momentum in Gold has eased after finding stability below the critical support level of $1,900.00. However, the likelihood of further decline remains prominent after today’s failure to push to $1,900 or hold the gains above the 20 SMA. XAU continues to grapple with a substantial sell-off, largely attributed to the ongoing five-week winning streak of the US Dollar Index (DXY).

The US Dollar gained momentum again in the past week, as investors adopted a more cautious stance concerning China’s economic prospects. The Chinese economy is facing notable deflationary risks due to weakened demand and a decline in exports. In response, Chinese authorities are anticipated to provide additional fiscal support aimed at revitalizing growth prospects and bolstering employment trends.

Just recently, on Monday, the People’s Bank of China (PBoC) reduced its one-year Prime Lending Rate (PLR) by 10 basis points to 3.45%, while the five-year PLR remained unchanged at 4.20% but markets are not satisfied with it. So, we remain bearish on Gold and will keep selling retraces higher after counter-trending earlier today, which went well. Although we missed the chance earlier to sell XAU, but we’re following the price action for another opportunity to go short.