XAU/USD Bounces Back, Rising Above $1,900

Gold (XAU/USD) Talking Points:

• Gold prices find temporary support above $1,900
• XAU/USD recovers from recent slump as bulls aim to drive price action back above $1,930
• USD and yields continue to contribute to driving sentiment and price action for precious metals.

Gold prices are currently trading in a narrow range of support and resistance around the key psychological level of $1900. As recession fears, inflation and rate expectations continue to drive price action, both fundamental and technical factors have contributed to the recent move.

From a fundamental perspective, Dollar strength interest rates remain key factors to consider for commodity prices. After the Federal Reserve announced its first-rate hike in March last year, XAU/USD declined before finding support at the November 2022 low of $1618,3.

Gold (XAU/USD) Weekly Chart

Chart prepared by Tammy Da Costa using TradingView

While treasury yields and the USD benefited from rising interest rates, the cost of doing so has weighed on consumers. Although the cost of borrowing has risen significantly over the past year, signs of an economic contraction have placed Central Banks in a difficult position.

As gold and silver remain sensitive to changes in monetary policy, the softer narrative has helped drive precious metals higher. With the Fed now expected to raise rates at a slower pace, the probability of a 0.25% increase at the next FOMC has risen to 95.2%

Source: CME FedWatch Tool

However, after recovering over 19% since November, Gold prices rose to a high of $1931.8 before moving lower. From the daily chart below, the strong upward move has been supported by the rising trendline which has persisted since the end of 2022.

As XAU/USD heads for its third consecutive month of gains, a hold above $1900 could continue to support higher prices. With the current weekly high holding as resistance at $1931.8, today’s 0.76% rise (at the time of writing) has assisted in pushing gold prices back towards the $1920 handle.

Gold (XAU/USD) Daily Chart

Chart prepared by Tammy Da Costa using TradingView

If prices breach $1931, the $1950 psychological level may come into play with a move higher bringing $1970 back into play.

— Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707