- Gold price recovery remains capped amid a risk-on market profile.
- The US dollar corrects with the Treasury yields as the Fed angst recedes.
- Gold trades between key daily averages, bearish RSI keeps downside appealing.
Gold price extended its rebound from six-week lows into the third consecutive day on Tuesday, closing the day just above the $1,800 mark. The bright metal rallied as high as $1,809 before easing slightly towards the closing. The bullish reversal in gold was mainly backed by the best three-day Wall Street rally posted since 2020, which reduced the demand for the safe-haven US dollar. The ongoing correction in the Treasury yields also helped gold reverse a part of the previous week’s losses, as the metal recorded the biggest weekly decline in ten. Stronger-than-expected US ISM Manufacturing PMI and JOLTS job openings data also failed to offer some reprieve to the dollar bulls, as the dust settled over the hawkish Fed decision. The calm before a potential Russia-Ukraine storm also kept gold buyers on the front foot.
Gold price is extending the retreat on Wednesday, despite the persistent weakness in the greenback and yields. Gold bulls turn cautious ahead of the US ADP employment numbers and ‘Super Thursday’, with the BOE and ECB decisions on the cards. The US private sector is seen adding 207K jobs in January vs. 807K previous.
The yellow metal also bears the brunt of the risk-on market mood, fuelled by the US corporate earnings outlook and signs that Fed officials favor calibrated monetary-policy tightening to tame inflation. Traders will also watch out for any geopolitical developments between the US and Russia over Ukraine. Diplomatic talks between the US, NATO and Russia showed little sign of a breakthrough.
Gold Price Chart - Technical outlook
Gold: Daily chart
At the time of writing, gold price is trading just below the $1,800 threshold, wavering between the horizontal 50-Daily Moving Average (DMA) $1,802 on the upside.
Meanwhile, bears are fencing the $1,795 area, where the horizontal 100-DMA aligns.
The downside appears more compelling, as the bearish wedge remains in play while sellers just have one key barrier in the 100-DMA to crack.
Additionally, the 14-day Relative Strength Index (RSI) is inching lower below the midline, allowing room for more declines.
Therefore, a sustained break below the 100-DMA will call for a retest of the January 28 lows of $1,780.
Once that is breached, the additional downside will target the December 16 troughs of $1,776.
Further south, the $1,750 psychological barrier will be back on bears’ radars.
On the flip side, recapturing 50-DMA on a daily closing basis is critical to take on the all-important 200-DMA once again, which is now at $1,806.
Should the renewed upside hold, gold buyers will look out to test the confluence of the wedge support-turned-resistance and bearish 21-DMA at $1,815.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.