Most read: USD looks to US PCE for clues to Fed path.Settings for EUR/USD, USD/CAD, USD/JPY
Gold prices lost ground on Monday after last Friday’s strong performance, weighed down by rising U.S. Treasury yields, a situation that generally makes non-interest-bearing assets less attractive compared to bonds. In this context, XAU/USD closed near $2,030, just below the confluence resistance zone around $2,035.
Many investors appeared to be taking a wait-and-see approach with respect to precious metals at the start of the new week, holding back from making big directional bets for fear of getting caught on the wrong side of the trade. This cautious sentiment can be attributed to a key event on the US economic calendar on Thursday: the release of the core PCE deflator, the Fed’s preferred inflation measure.
According to the forecast, core PCE will increase by 0.4% month-on-month in January, resulting in a slight deceleration in the annual reading from 2.9% to 2.8%. However, traders should be prepared to see an unexpected uptick in the data, reflecting the trends observed in his CPI and PPI survey disclosed earlier this month. This can lead to increased volatility in financial markets.
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Upcoming US economic data
sauce: DailyFX Economic Calendar
A red-hot PCE report showing stalled progress in disinflation raises concerns that central banks may be forced to delay the start of their easing cycle in response to setbacks in price stability efforts could push interest rate expectations in a more hawkish direction. While this scenario should be bullish for yields and the US dollar, it will pose a challenge for the precious metals complex.
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Technical analysis of gold prices
Gold prices turned lower on Monday after failing to break out of the $2,035 zone, the confluence resistance area where the downtrend line intersects with the 50-day simple moving average. If this bearish rejection is confirmed within the next few days, a pullback towards $2,005 could be imminent. Further declines will focus on $1,990 and then $1,995.
Conversely, if the buyers regain decisive control of the market and trigger a breakout above $2,035, the bullish momentum will accelerate, strengthening the upward momentum and providing the basis for a rally towards $2,065. may be built. A further rally past this milestone could focus attention on $2,090 and then an all-time high of $2,150.
Gold price (XAU/USD) chart
