Gold Price Analysis: XAU/USD drops back below 1900, as US dollar rebounds ahead of data

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  • Gold price rebounds on dovish Fed expectations despite hotter US inflation.
  • Weakness in US dollar and Treasury yields motivate gold bulls.
  • Gold Weekly Forecast: XAU/USD snaps four-week winning streak, closes below $1,900.

Update: Gold price has retraced below the $1900 mark once again, having tested Tuesday’s high near $1903. The latest leg down in gold price comes on the back of a tepid bounce staged by the US dollar, as the Treasury yields trim losses across the curve. The greenback fell in tandem with the US rates on Thursday after strong US CPI data failed to ignite investors’ beliefs that the Fed could begin dialing back stimulus, as they continued to see the price rise as temporary.

Meanwhile, a dovish stance by the ECB and optimism on the US infrastructure spending plan also collaborated with the upside in gold price. Next of relevance for gold price remains the G7 talks and the US Michigan Preliminary Consumer Sentiment data for fresh moves.

 

Gold price is looking to extend Thursday’s stellar performance on the final trading day of this week, as the bulls briefly recapture the $1900 mark. The ongoing decline in the US Treasury yields continues to boost gold price at the dollar’s expense. Despite a hotter-than-expected US CPI print, markets remain hopeful that the Fed will dismiss the price rise as temporary and maintain its accommodative monetary policy stance until its employment goals are achieved. Therefore, the greenback tumbled alongside the yields, bumping up gold price from five-day lows near $1870.

The narrative around the dovish Fed expectation will continue to play out heading into the FOMC decision due next week, underpinning the sentiment around gold. In the meantime, traders await the Michigan Preliminary Consumer Sentiment data for some near-term trading incentives.

Read: Top commodities to trade amid global reflation: Silver and copper to outshine gold price

Gold Price: Key levels to watch

The Technical Confluences Detector shows that gold price is looking to retest the previous month high at $1913 on the bullish reversal.

Ahead of that target, the pivot point one-day R1 at $1908 needs to be cleared.

If the buying interest accelerates, gold price could revisit the previous week high at $1917.

Meanwhile, the bulls remain hopeful so long as the price holds above powerful support around $1894, which is the confluence of the SMA5 four-hour, Fibonacci 61.8% one-week and Fibonacci 23.6% one-day.

The next line of defense awaits around $1890, where the Fibonacci 38.2% one-day coincides with the SMA10 four-hour.

Further south, the Fibonacci 61.8% one-day at $1882 could come to the buyers’ rescue.

Here is how it looks on the tool       

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About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

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