- XAU/USD plunges even if the USD depreciates after better-than-expected US data.
- Gold maintains a bullish bias as long as it stays above the up trendline.
- Only a new lower low could open the door for a larger drop.
The gold price plunged after reaching $1,974 yesterday. Later, it pared gains, dropped as low as $1,878 where it found strong support. In the short term, it rebounded after such a heavy drop.
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Technically, the throwback was stopped at the $1,916 historical level. At the time of writing, the bias remains bearish. The XAU/USD may test the immediate support level before developing a new leg higher. In my opinion, gold remains very attractive for traders and investors during these geopolitical tensions between Russia and Ukraine.
Later today, the XAU/USD may react after the US data release. The Core PCE Price Index reported a 0.5% growth in January, same as in December, Durable Goods Orders rose by 1.6% in January, exceeding the 1.1% growth expected and the 0.7% drop in December, while the Core Durable Goods Orders surged by 0.7% more compared to 0.4% expected. Furthermore, the Personal Income indicator reported a 0.0% raise even if the traders expected a 0.3% drop, while the Personal Spending registered a 2.1% growth, beating the 1.6% growth forecasted. Finally, don’t forget that the Revised UoM Consumer Sentiment and the Pending Home Sales could also bring some action.
XAU/USD price technical analysis: Corrective phase
Gold plunges after the US reported positive economic data earlier. A strong USD could force the yellow metal to drop. As you can see on the 4-hour chart, the XAU/USD found resistance right above the $1,916 static resistance (former high), and now it could come back to test and retest the up trendline. As long as it stays above the uptrend line, the price of gold could start growing again and develop a new leg higher.
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Contrarily, a valid breakdown below the uptrend line could announce a larger downside movement. Actually, a new lower low, dropping, and closing below yesterday’s low of $1,878 could activate more declines.
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Saqib Iqbal
