Gold prices remain stable mainly due to a softer US dollar.
Financial markets opened in risk-off mode on Wednesday, resulting in firmer US Dollar demand across the board. XAU/USD plummeted to $1,969.20, its lowest level in over two weeks, before gradually rising to trade around $1,995 per troy ounce. Late on Tuesday, US Federal Reserve officials Raphael Bostic and James Bullard stated that additional rate hikes are needed to stabilise inflation in the United States. As a result, Asian and European stocks fell somewhat, while government bond yields rose.
The risk-off mentality has largely subsided ahead of the opening of Wall Street, with American indexes currently trading neutral. The Dow Jones Industrial Average and the S&P 500 are both in the negative, while the Nasdaq Composite is trading near its starting level.
Meanwhile, government bond yields are rising due to inflationary concerns. The annual Consumer Price Index (CPI) in the United Kingdom was higher than expected in March, increasing by 10.1% year on year, while the Eurozone confirmed the annual Harmonised Index of Consumer Prices (HICP) at 6.9% in the same time. The 10-year US Treasury note yields 3.60%, a 3 basis point (bps) increase, while the 2-year note yields 4.24%, a 5 bps increase.
Short-term technical prognosis for the XAU/USD price
The XAU/USD pair continues to lose bullish traction, albeit a greater loss appears uncertain. The pair temporarily traded below a bullish 20 SMA, but is now struggling to stay above it. Simultaneously, the longer moving averages retain bullish slopes considerably below the shorter ones. Technical indicators, on the other hand, have extended their drops within positive levels, and are now approaching their midlines with limited downward power. Gold may continue to fall in the next days, but given the US Dollar’s overall weakening, the prospects of an approaching negative trend remain slim.
Furthermore, at $1,991.80, XAU/USD is trading around the 23.6% Fibonacci retracement of its most recent daily rise, assessed between $1,809.38 and $2,048.67. The 38.2% retracement is currently at $1,957.10, which provides key support in the event of another run lower. Once below the latter, the risk of a persistent downward trend rises.
The pair is neutral-to-bearish in the short term, according to the 4-hour chart. XAU/USD is developing beneath a bearish 20 SMA while attempting to recover above a flat 100 SMA. This converges with the previously noted 23.6% Fibonacci retracement, confirming the resistance level. Meanwhile, the 200 SMA is losing bullish momentum but remains considerably below the present level. Finally, technical indicators have recovered from oversold circumstances but have lost directional strength within negative levels.
Levels of support: 1,981.00, 967.80, and 955.90
Levels of resistance: 2,011.90, 2,021.50, and 2,032.00