Gold was showing some decent bullish momentum late last year and in January, as inflation and the economy slowed in the US, which had traders thinking
Gold was showing some decent bullish momentum late last year and in January, as inflation and the economy slowed in the US, which had traders thinking that the FED would stop hiking interest, and the FED rhetoric turned dovish. But, since early this month we have seen selling pressure accumulate after a strong bearish reversal. Gold prices have declined by more than 6% since early February, when XAU/USD was trading at a nine-month peak.
But, the jump in employment and ISM services in January gave the USD a strong push higher, while risk sentiment turned negative. Besides that, inflationary pressures are not yet over, which means that the FED will continue to raise rates and they will remain high for a longer period, which is putting pressure on Gold prices.
Gold H4 Chart – The 20 SMA Keeping the Pressure to the Downside
MAs have turned into resistance for Gold
GOLD made a strong bearish reversal at $1,960 and sellers pushed the price below all moving averages pretty quickly during that crash. The decline has slowed, but the selling pressure has resumed after the 200 SMA (purple) turned into resistance on the H4 chart last week and yesterday we saw the last rejection by this moving average.
The economic activity has shown resilience, beating expectations for a recession by now. But, some economists think that this growth is coming at a cost as inflation pressures rise. the Prices Paid Index rose to 45 points, up from January’s reading of 33 points. The Federal Reserve has turned hawkish again, pledging to maintain its aggressive policy throughout 2023.
Markets are already starting to price in the FED Funds rate above 5% by the summer, especially after the retail sales report for January. We saw a decline in December, but that was due to the freezing weather conditions around Boxing Day, so the US consumer came back in January and sales jumped by 3% last moment, giving the USD another push higher today.
GOLD
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