Author: Mr. Amar – Technical Analyst
Gold prices rose during the last two weeks before reversing from the yearly resistance line on Thursday. That said, the market’s cautious sentiment ahead of this week’s crucial Federal Open Market Committee (FOMC) downbeat on US Treasury yields and the US Dollar Index (DXY) performance to reinforce the yellow metal’s safe-haven demand in the recent days. In addition to that, geopolitical concerns relating to the Russia-Ukrainian war and Omicron babbles, not to forget inflation woes, also directed market players towards the traditional risk-safety. Further, reports of Russia’s preparations to invade Ukraine also take rounds of late, which in turn keep gold in demand.
Technically, analysts have predicted that XAU/USD will respect the pullback towards $1825 or further at $1816 which aligned with the Fibonacci retracement at 61%. In regards to that, if sellers keep dominating pass through $1812, theory suggests a gradual south-run towards September 2021 low surrounding $1721 could be achieved. In the four-hour chart, a bearish rising wedge pattern showed gold is respecting all the important prices and has reached the last resistance point which was $1847.
If positive data shows for this week’s FOMC and PCE, Dollar Index will definitely strengthen and XAU/USD will move in a dovish momentum towards the key support level. The Fed has already yielded that inflation is stickier than previously thought, so even the expected print may do little to firm up the hawkish stance among FOMC members. However, higher inflation could certainly support gold’s inflation-hedging appeal, especially if it follows a Fed event that trims rate hike expectations for this year.