XAU/USD, the trading symbol for gold against the US dollar, is now at $4,065.29. The precious metal keeps a bullish bias pervading, sitting comfortably above its 50-, 100- and 200-day Simple Moving Averages (SMAs). With all this upward momentum behind it, gold’s price action is still limited, unable to punch through a key ceiling of $4,075.05 per ounce. Market participants are closely monitoring upcoming economic indicators, particularly US Purchasing Managers’ Index (PMI) data, which may influence future price directions.
The gold market’s pullback is indicative of both ebullient and cautious investor sentiment. Gold prices in terms of XAU/USD are still trading significantly above their long term moving averages. The 21-day SMA has recently flattened and begun to decline, a sign of weakness in the short-term trend. The price has entered a range that should feel very familiar. That indicates indecision in the market direction, with traders considering multiple economic factors.
Technical Analysis of XAU/USD
XAU/USD’s price action has erupted as of late with distinct dependence on major technical supports and resistances. As it stands, the local dynamic support floor sits around $4,044.66, which might act as a cushion for the price from any serious downward pressure. On the upside, the 38.2% Fibonacci retracement level at $4,075.05 serves as short-term resistance. A daily close over this critical level may be enough to send prices shooting higher. This would open up the next major resistance level of $4,133.50 – the 50% retracement – for consideration.
If gold cannot clear this resistance, upside potential could be capped. This lack of cementing new support significantly increases the chances of a retreat back toward its upward-trending 50/200 day averages. The general market momentum is neutral right now, which means traders need to be careful when taking action to make their trades. Thus far, the macro high for XAU/USD is $4,381.17 and macro low of $3,885.84.
Economic Influences and Market Sentiment
Now, it’s the larger economic environment that’s having the biggest influence on gold prices. Just last week, Cleveland Fed President Beth Hammack worried about the need for monetary policy changes.
“Cutting rates further right now carries a wide range of risks for the economy.” – Beth Hammack
These types of proclamations from the monetary authorities can have profound effects on investor psychology that can easily lead to rapid swings in asset prices, gold included. In addition, Fed Governor Lisa Cook recently echoed some of these concerns, calling attention to the dangers posed by asset price crashes.
“There is a risk of outsized asset price declines.” – Lisa Cook
As economic indicators like PMI data are released, market participants will be keen to assess their implications on monetary policy and overall economic health.
The Path Forward for Gold Traders
Looking ahead, the XAU/USD’s easiest way seems to be clearing the resistance line at $4,075.05. If the price closes above this level on a daily basis, it proves to be a more bullish trend. This would set a precedent for increasing targets even further. On the other hand, staying under this threshold might hold advances limited and reapply downwards strain on gold costs in opposition to its ascending means.
Traders will want to pay special attention to upcoming economic data releases. They will have to mind central bank jawboning, which is sure to shape market dynamics. With the prevailing momentum being called neutral, positioning will be key as traders look to find their footing in a market still shrouded in uncertainty.