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  • The XAU/USD challenges a confluence area which stands as an upside obstacle.
  • A new higher high could really activate an upside continuation.
  • Only a new lower low could invalidate a new leg higher.

The gold price is struggling to extend its growth. Meanwhile, the bearish pressure remains high as long as the price stands below the near-term upside obstacles. The yellow metal is trading at 1,932.52 at the time of writing.

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The XAU/USD developed a downtrend channel pattern that may result in an upside reversal, a new leg higher. Still, we’ll have to wait for confirmation before taking action.

As you already know, the UK inflation data was released today. The Consumer Price Index registered a 6.2% growth in February, versus 6.0% expected compared to 5.5% in the last reporting period. In addition, the Core CPI rose by 5.2% in the last months versus 5.0% estimates and 4.4% growth in January.

As you already know, gold is used as a hedge against inflation. Higher than expected UK inflation could help the yellow metal to grow. Fed Chair Powell Speaks had a big impact on gold as well. Earlier, the US New Home Sales indicator was reported at 772K versus 809K forecasts compared to 788K in the previous reporting period.

Gold price technical analysis: Downtrend channel playing

gold price

As you can see on the 4-hour chart, XAU/USD challenges the confluence area formed at the intersection between the downtrend line with the weekly pivot point (1,934). A valid breakout through this confluence area could activate an upwards movement, a new leg higher.

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Technically, a false breakout through a confluence area may announce a potential move in the opposite direction. The flag pattern could represent a bullish formation only if XAU/USD makes a valid upside breakout. The 1,918 level stands as strong support. It could still develop a new leg higher as long as it stays above this level.

Only a new lower low could invalidate potential upwards movement and open the door for a larger drop. 1,941.53 former high stands have strong upside obstacles. On the other hand, a new higher high could validate more gains.

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