The 50 Daily SMA Keeping Gold Bullish, Making Higher Lows

After turning bearish in the first week of October last year, Gold started the new year with a bearish reversal, falling below $2,050 last week. This week sellers continued their job, pushing XAU to $2,013, but it made a reversal after the US CPI inflation report on Thursday and ended the week bullish, despite giving back some of the gains on late Friday.

GOLD (XAU/USD) saw buying demand on Friday, continuing its rebound from a one-month low around $2,013, which coincided with the 50-day Simple Moving Average (yellow) on the daily chart. This moving average acted as support back in December after Gold returned from above $2,100 and it held the price again this week, so this is the main indicator showing whether Gold is bullish or bearish, and right now it is bullish.

Another bullish indicator is the higher lows during pullbacks lower, which indicates that the trend is bullish. Despite Thursday’s rising US consumer price index (CPI) inflation, the markets are convinced of a rate cut in March, weighing on the US dollar and supporting the bullish action of Gold. Therefore Gold has risen significantly as investors anticipate an interest rate drop by the Federal Reserve (Fed) at their policy meeting in March.

Meanwhile, on Friday the US Producer Price Index (PPI) report for December showed an increase, but it was lower than expected, while the rising Middle Eastern tensions have also been helping boost the demand for XAU. After the US and UK militaries began airstrikes on Houthi targets in Yemen this week concerns about the spread of Middle Eastern hostilities have increased again, as Iran may potentially join the conflict in Gaza. However, we saw a pullback on late Friday, sending Gold around $20 lower from the day’s highs, indicating that the situation might calm down over the weekend, however we will see how markets will open next week.

Gold XAU Live Chart