Gold remains under pressure from intraday lows as it breaks its four-day uptrend. Cautious mood ahead of key data/events supports the US dollar while making an easy start to the important week. According to analysts, golden bears need approval from the US CPI and Fed hawks.
Strengthening dollar puts pressure on gold
On Monday, the golden bulls took a step back after a four-day winning streak. Thus, the gold price continues its decline around $1,785. Although mild, the yellow metal’s recent losses seem to be linked to the recovery of the US dollar. However, the lack of important data/events on Monday is straining bullion sellers. However, the US Dollar Index (DXY) is hovering around 105.20, gaining 0.20% at press time. In doing so, the dollar’s benchmark against the six major currencies is rising for the second day in a row.
cryptocoin.comAs you follow, DXY challenged the two-day downtrend on Friday after upbeat numbers from the US Producer Price Index (PPI) and University of Michigan (UoM) Consumer Sentiment Index for November and December, respectively. It’s also possible that the recently strengthened inflation expectations, which underpin the hawkish bets on the Federal Reserve’s (Fed) next move, have also bolstered the dollar bulls. Additionally, fears of global recession and traditional safe-haven status also underpin the recent rise of the US dollar.
Market awaits US CPI and FOMC decision
There is an air of optimism in the latest economic outlook for China, one of the biggest consumers of gold. However, doubts about the Fed’s further hawkish bias are challenging the golden bears. The combination of these two situations creates a partial equilibrium in the market. “Inflation has already peaked,” said David Mann, chief economist for Asia-Pacific, Middle East and Africa, Mastercard Institute of Economics. However, it will remain above pre-Covid levels in 2023,” he said. Rising inflation fears support a hawkish bias from the Fed. Also, the golden bears are keeping hopeful ahead of Tuesday’s US CPI and Wednesday’s FOMC meeting.
Gold price technical analysis
Market analyst Anil Panchal draws the technical picture of gold as follows. Gold has retraced from the seven-day horizontal resistance area around $1,805. This too joins the bearish RSI (14) line, not oversold, to support the golden bears. However, sellers are currently targeting the $1,783-84 support cross, including the 100 Hourly Moving Average (HMA), the 200-HMA, and an ascending trendline from Nov.
However, any further downside move needs to be confirmed at $1,766 before leading the golden bears to the late November lows of around $1,721. Meanwhile, an upside break near the indicated horizontal resistance zone at $1,805 must stay above the monthly high of $1,810 to keep gold buyers on the table. Then, a rally to the tops marked in June near $1,857 and $1,880 is possible.
Technical view of gold
Market analyst Sagar Dua draws attention to the following levels in the gold technical outlook. On an hourly scale, gold price drops near the upside trendline drawn at $1,721.23 from November 23 low. The precious metal delivered the 50-period Exponential Moving Average (EMA) at $1,791.60. However, the 200-EMA near $1,780.00 is still advancing. Also, this contributes to the upstream filters.
Meanwhile, the Relative Strength Index (RSI) dropped sharply from the 60.00-80.00 bullish range to near 40.00. A shift within the 20.00-40.00 range will trigger a bearish momentum ahead.
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