Gold Price Reverses Losses and Attracts Fresh Buying (....)

Gold Price Reverses Losses and Attracts Fresh Buying (...)

Gold price (XAU/USD) saw renewed buying interest during the Asian session on Friday, managing to recover a portion of its recent retracement from the $1,885 level, which marked a two-week high. As of now, the precious metal is trading just above the $1,870 mark, showing a 0.10% gain for the day. However, a substantial upward movement currently appears unlikely.

The US Dollar (USD) is taking a pause following a strong rally on Thursday, driven by higher-than-expected US consumer inflation figures. The USD's retreat is partly attributed to a slight pullback in US Treasury bond yields. Additionally, the ongoing geopolitical tensions between Israel and the Palestinian group Hamas are providing some support for gold prices. Nevertheless, the upside potential remains limited due to resurging expectations of another Federal Reserve (Fed) interest rate hike in 2023.

The US Bureau of Labor Statistics (BLS) released data on Thursday, reporting a 0.4% increase in the US Consumer Price Index (CPI) for September, with the annual rate remaining at 3.7%, contrary to market expectations of a decrease to 3.6%. The Core CPI, which excludes volatile food and energy prices, matched estimates and eased to 4.1% year-on-year in September, reaching a 24-month low. The fact that inflation remains well above the Fed's 2% target is supporting the case for further tightening of monetary policy by the US central bank.

The current outlook could potentially boost US bond yields and the USD, prompting caution before entering new bullish positions on gold. However, the recent dovish comments from several Fed officials have fueled speculations that the central bank is nearing the end of its rate-hiking cycle. This has been limiting the upside in US bond yields and preventing the USD from capitalizing on its recent recovery from a two-week low.

Given the mixed fundamental backdrop, it would be prudent to await strong follow-through buying before considering a resumption of the recent recovery in XAU/USD from the $1,810 area, which marked a seven-month low last week. From a technical perspective, the price is currently in a bearish setup until the $1,915.000 area, with potential for a reversal around the $1,900.000 area in the direction of the prevailing downtrend.


Short-Term Setup | Our preference:

Short positions below 61.8% for a Pullback and Stop loss 1915.000 Targets at 1850.000 & 1810.550 in extension.