GOLD PRICE, CHARTS AND ANALYSIS:
- Gold (XAUUSD) Technicals Hint at Retracement but Safe Have Appeal Keeps Bears at Bay.
- Chinese Inflation Does Little to Instill Confidence Regarding Growth and Demand.
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GOLD (XAU/USD) AND DOLLAR INDEX FUNDAMENTAL BACKDROP
Gold prices have somewhat stabilized following yesterday’s whipsaw price action. Gold came within a whisker of the psychological $2050 handle before a brisk selloff saw the precious metal end the day in the red.
Gold prices have continued to retreat this morning as the Dollar Index (DXY) hit a fresh one-week high. Gold is precariously poised at the minute with growing uncertainty around a global recession keeping the precious metal supported. Gold seems unable to push convincingly above the $2050 level with a growing case from a technical perspective for bearish interest. Bears defended the $2050 level yesterday but any follow through continues to be negated by safe have appeal.
Currency Strength Chart: Strongest – JPY, Weakest – AUD.
Yesterday’s US CPI Data was seen as a positive for market participants eyeing a pause in Fed rate hikes. Markets are now pricing around a 94% probability of a pause but consensus on rate cuts in the second half of 2023 continues to be a point of contention which is driving the US Dollar. This is also being reflected in the uncertainty of the moves in gold of late with a lot of whipsaw price movements by the precious metal.
Chinese inflation data didn’t too much for Gold prices as they came in rather mixed with headline CPI in China rose by 0.1% rate in April, the lowest rate since February 2021 and missing forecasts of 0.4%. Chinese PPI data contracted for the seventh consecutive month and registered its fastest drop since May 2020. There has been continued rumblings around the speed and strength of the Chinese recovery with today’s inflation data likely to add further uncertainty. A ramp up in global recessionary fears will weigh positively on Gold prices moving forward.
Not a lot to look forward to on the calendar today but US PPI is likely to be of interest. Producer price increases will provide a snapshot into the possibility of a rise or further declines in US inflation in the months ahead and could result in some movement in the DXY and thus Gold.
TECHNICAL OUTLOOK AND FINAL THOUGHTS
Form a technical perspective, Gold price action has been overshadowed of late by overall market sentiment and safe haven demand. Many technical setups of late have failed as market sentiment continues to turn on a dime, bear this in mind when taking any position at the moment.
Yesterday saw the daily candle print a doji candle close with a new lower high as well hinting at further downside. The early European session has seen a push lower for the precious metal trading around $2024 at the time of writing. In order for bears to really seize control, the precious metal needs to gain acceptance below the $2000 handle which lines up with the bottom end of the ascending channel. A close below could bring the 50-day MA into consideration around the $1968 mark.
Alternatively, a push higher would need a daily candle close below the $2050 mark to invalidate the bearish bias. This could see Gold finally push beyond its all-time highs and clear the $2100 mark.
Lots to consider at the moment with gold prices as the momentum continues to shift back and forth. Do not marry a bias and remain nimble to any unforeseen changes which may and at this stage appear likely to occur.
Gold (XAU/USD) Daily Chart – May 11, 2023