Market analyst Anil Panchal states that gold is struggling to sustain its recovery from Friday’s $1,780 region, or the lowest level since Dec. 16, and faced a fresh sell-off on the first day of the new week. Gold prices remained depressed in the early European session and were most recently traded around the $1,790 region.
“Gold prices fail to benefit from DXY pullback”
cryptocoin.com As we reported, expectations for a faster policy tightening by the Fed and the rise in US Treasury yields emerged as a key counter-moving factor for non-yielding gold. Apart from that, the analyst says the recovery in the global risk sentiment has further weakened the safe-haven precious metal, as evidenced by the generally positive mood in the equity markets. This has reached day four of a downside move for dollar-denominated gold, which could help limit further losses through the modest weakness of the US dollar. The analyst makes the following assessment:
Gold investors may prefer to stay on the sidelines ahead of this week’s key central bank event risks and key US macro data scheduled for the start of the new month.
The Reserve Bank of Australia will announce its policy decision on Tuesday amid rising bets on an earlier rate hike. This will be followed by the Bank of England and the European Central Bank duo on Thursday. Investors will take cues from the release of the US monthly employment report (NFP) before placing new direction bets around gold. Entering the European session on Monday, the analyst says that the intraday low has revived around $1,786 and comments:
In doing so, the yellow metal fails to benefit from a US dollar pullback as US Treasury yields remain stronger and stock futures fail to sustain Friday’s recovery. This may be due to market indecision ahead of the March Fed meeting and this week’s US jobs report.
This data and developments for gold will be followed
Further, the analyst notes that geopolitical fears surrounding Russia are adding to the risk-averse mood and technically stifling gold prices to justify bearish confirmation. The US Dollar Index (DXY) watches pessimistic Treasury rates to continue Friday’s pullback from the highest levels since July 2020. The market’s indecision about the pace of rate hikes in March may be behind the move, according to the analyst, following recent pessimistic wage data:
While the Fed’s hawkish stance stifled gold prices last week, the US 4th Quarter Employment Cost Index (ECI) poses challenges for Fed policymakers, who expect a 0.50% rise.
However, strong readings of the Core PCE Price Index for December, the Fed’s preferred gauge of inflation, rose to 4.9% compared to the previous 4.8% and 4.7%, keeping the Fed hawks on the table. Following the release of US data, Minneapolis Central Bank Governor Neel Kashkari said he expects the Fed to raise interest rates at its March meeting. While emphasizing the importance of the incoming data, the policy maker said, “I have to see how the data works.”
Along the same lines was Raphael Bostic, head of the Atlanta branch of the Fed, who, in an interview with the Financial Times (FT), reiterated his call for three Fed rate hikes in 2022. “If the data shows that it is developing in a direction where a 50 basis point move would be necessary or appropriate, then I will lean towards that,” the Fed Chairman said. Raphael Bostic also stated that he would be uncomfortable with it if it made sense to move forward in successive meetings.
Elsewhere, the US Senate’s aggressiveness to pass legislation imposing economic sanctions on Russia is also suppressing risk appetite. “U.S. senators are very close to agreeing on a law that will impose sanctions on Russia’s actions against Ukraine, including certain measures that may come into effect before any invasion,” the two leading senators said on Sunday.
With these developments, a mild calendar on Monday may strain gold traders, but Friday’s US jobs report and Treasury yields will be given a high priority for fresh momentum.
Gold prices technical analysis
Market analyst Anil Panchal states that gold prices have shown a downtrend for the past four days while staying below the $1,795-96 resistance confluence, including the 100-DMA and an ascending trendline from August. The yellow metal’s dips also take cues from the oversold, bearish MACD signals and the bearish RSI.
As a result, the analyst reminds that the 61.8% Fibonacci retracement of April-June 2021 could act as immediate support to watch for gold sellers, upside down around $1,770. Following that, December’s low surrounding $1,753 will be crucial as it holds the key to a further downside move towards September’s low of $1,721. The analyst draws attention to the following technical levels:
Alternatively, a daily close above $1,796 would need confirmation from the $1,800 threshold to re-target the annual resistance line around $1,845. Even if gold buyers manage to clear the $1,845 resistance, the monthly high near $1,853 will be crucial for the metal’s upside move.
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