Can XAUUSD ignore the recent lethargy?

  • Wall Street futures pared Tuesday’s gains as optimism faded.
  • The better performance of the US dollar undermines the demand for gold.
  • The price of gold rebounds modestly from a Fibonacci level at $1,925.00 and remains within range.

The price of gold sits around $1930.00 per troy ounce, still struggling for direction as financial markets attempt to assess central banks and war-related headliness, although it is exerting upward pressure and approaching the weekly high of $1,941.24. XAUUSD rises on poor market sentiment as Wall Street reverses course after Tuesday’s gains. The US dollar is also appreciating in an environment of risk aversion, mainly against its European rivals. Commodity-linked currencies, on the other hand, are finding support in soaring oil prices, hitting new multi-month highs against the greenback.

Meanwhile, US indices remain in the red, keeping the price of gold afloat. US indices had briefly extended their slides after the initial slump, now consolidating early losses. The Nasdaq Composite fared better than its peers, down a modest 0.19%. The Dow Jones Industrial Average, on the other hand, remains near its daily lows, currently down 244 points.

Sentiment trading has been the main theme since Russia invaded neighboring Ukraine, which initially sent the price of gold towards all-time highs in the $2,070 price zone. The crisis continued to worsen day by day, but demand for the safe-haven metal has receded due to the strength of the broader dollar. Additionally, the greenback has benefited from a more aggressive stance on monetary policy by the US Federal Reserve, as current measures to control inflation have proven insufficient.

Yields on US Treasuries play an important role in the direction of the market. Government bonds had pared their slump on Tuesday, but not before the yield on the 10-year Treasury bill peaked at 2.417%, a new multi-month high. The yield on the 2-year note peaked at 2.198%, but is now hovering around 2.15%.

The soft tone in equities is exacerbated by soaring oil prices. In the absence of relevant macroeconomic figures, the financial markets are hovering around the Russian-Ukrainian crisis. Crude oil prices are on the run again, following some comments from Moscow. President Vladimir Putin said they intended to use the Russian ruble when selling gas to “unfriendly” countries, saying they would honor their supply contracts. A barrel of WTI is currently changing hands at $113.65, its highest in two weeks. Rising oil prices provide unexpected support to the price of gold.

Read also : Gold Price Tries To Rebound After Testing Key Support

Gold Price Technical Outlook

XAUUSD spent the week hovering around a Fibonacci level, the 50% retracement of this year’s rally to $1,925.20. Movements away from the level were shallow, although the price of gold had bottomed the previous week near the next Fibonacci support level at $1,980.00, while intraday advances failed to reach the 38.2% retracement at $1,960.00. Market participants look for a clean break from one of these extremes for more sustained directional strength.

Technical readings in the daily chart suggest that The price of gold may come under further pressure as it has been unable to break above a fixed level of 20 DMA for more than a week, meet vendors around her. The same chart shows that the technical indicators are directionless around their midlines, reflecting sidelined speculative interest.

From a fundamental standpoint, however, XAUUSD has room for further appreciation and retesting the determination of the bears around the $2,000 figure, while a break above it could result in a test of records in the $2,070 price zone.

Richard L. Militello