Fundamental Background for Gold (XAU/USD)
This morning, gold continued to rise ahead of the European open before halting, mostly due to a lower dollar index and rising mood. According to Fitch Ratings, economic growth will reach its high in 2023 at 5% instead of 4.1%, which reflects a speedier rebound in activity and consumption.
Following yesterday’s comments by Fed Chair Powell at the Economic Club in Washington, DC, the dollar index has slowed down. Chair Powell didn’t seem aggressive enough and repeated his press conference after the FOMC meeting last week in his first statement after the big employment data last week. Markets took more comfort in Powell’s comments on disinflation, which sparked a rebound in risk assets and nearly erased the previous two days’ losses for US indexes. The Fed Funds peak rate’s ongoing repricing holds the key as the dollar index (DXY) remains the market’s primary driver.
If we are to see a last surge up toward the crucial $2000 level, gold needs a trigger. Up until Friday, when we get the preliminary Michigan Consumer Sentiment release, there are no big impact data releases. For the time being, focus will be on the different Federal Reserve policymakers and their language, which is likely what will cause the next move in precious metals.
TECHNICAL PERSPECTIVE
It does, however, continue to trade inside a $26 range between $1860 and $1886, with an upward breakthrough now becoming more plausible.
If we want to see the bullish trend continue, a daily candle closure over $1900 is necessary as immediate resistance. The $1850 critical level that coincides with the 50-day MA has yet to be touched but is still some ways away at this time, should the Fed officials spur a dollar rally.