XAU/USD faces resistance despite recovering from recent pullback
Updated
Gold (XAU/USD) started the week trading with a positive bias after last week's correction. The precious metal dropped over 4% as strong economic data in the US continues to hinder the hopes of rate cuts from the Federal Reserve. Commentary last week from several FOMC members continued to point towards a restrictive policy for the foreseeable future, at least until meaningful progress in disinflation resumes.
The pullback did serve bulls for one thing: to confirm that support remains intact at the 23.6% Fibonacci ($2,326), a level that has halted declines in the past. There is still a lack of desire to be a seller of gold, given the prospects of further appreciation when the Fed – eventually – starts cutting rates. Fear of a resurgence in geopolitical tensions also continues to limit the downside in gold.
However, the bullish drive that was so evident in the first quarter of the year has started to dissipate. The path of least resistance remains higher, but it is becoming more laboured, with tougher and more frequent levels of resistance. XAU/USD will likely remain volatile in the coming weeks as more insight into the path of interest rates is sought. The US PCE index released later this week could offer some momentum, especially if the data deviates from what’s expected. Further Fedspeak will also continue to determine the direction for the precious metal.
Technically, the daily chart shows that XAU/USD is primed for another rally as the RSI rebounds from just below 50. The support from Fibonacci has offered buyers a new chance to push higher but there is some resistance in the short-term. The 20-day SMA, currently at $2,351, has moved back above the price, which may suggest some continued weakness over the next few days. Any correction is likely to remain superficial as long as XAU/USD holds above $2,300.
The pullback did serve bulls for one thing: to confirm that support remains intact at the 23.6% Fibonacci ($2,326), a level that has halted declines in the past. There is still a lack of desire to be a seller of gold, given the prospects of further appreciation when the Fed – eventually – starts cutting rates. Fear of a resurgence in geopolitical tensions also continues to limit the downside in gold.
However, the bullish drive that was so evident in the first quarter of the year has started to dissipate. The path of least resistance remains higher, but it is becoming more laboured, with tougher and more frequent levels of resistance. XAU/USD will likely remain volatile in the coming weeks as more insight into the path of interest rates is sought. The US PCE index released later this week could offer some momentum, especially if the data deviates from what’s expected. Further Fedspeak will also continue to determine the direction for the precious metal.
Technically, the daily chart shows that XAU/USD is primed for another rally as the RSI rebounds from just below 50. The support from Fibonacci has offered buyers a new chance to push higher but there is some resistance in the short-term. The 20-day SMA, currently at $2,351, has moved back above the price, which may suggest some continued weakness over the next few days. Any correction is likely to remain superficial as long as XAU/USD holds above $2,300.
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