Gold Slips to $1,824: Double Bottom to Support

Gold prices closed at $1827.25 after setting a high of $1843.25 and a low of $1822.10. On Thursday, GOLD snapped a four-day bullish streak and reversed its momentum, owing primarily to rising US Treasury yields. The yield on the benchmark 10-year note in the United States surpassed 2% for the first time in two and a half years, reaching its highest level since August 2019. The US Consumer Price Index surged more than expected in January and raised the chances of a half-point tightening by the central bank at next month’s policy meeting.

Given the rising inflationary pressures, market participants have begun to bet on more than four rate hikes this year. The US CPI jumped 7.5% in the 12 months through January, the biggest year-to-year increase since 1982. However, more rate hikes could negatively impact economic growth, leading to higher gold prices.

During the first half of the trading session, gold prices increased and reached their highest level in two weeks, supported by the weak US dollar. The rising inflation figures also raised the demand for gold as a hedge against higher prices. However, the resultant hike in interest rates increased the opportunity cost of holding non-yielding bullion.

On the data front, at 18:30 GMT, the US CPI surged to 0.6% against the forecast 0.4% in January and supported the US dollar. The Core CPI also moved to 0.6% against the predicted 0.5% and supported the US dollar. Unemployment claims remained unchanged at 227K, as expected. The good news from the United States did not help the dollar, but the rising interest rate environment triggered by the higher inflation figures added weight on the precious metal.

The US Dollar Index, which measures the greenback’s value against the basket of six major currencies, first rose to the 96.0 level but failed to remain there and dropped to the 95.5 level on Thursday, keeping the losses in precious metals limited for the session. Meanwhile, the UK Prime Minister said that Europe was facing the most dangerous moment in its biggest security crisis for decades as tensions were growing between Russia and Ukraine. He hoped that strong deterrence and patient diplomacy could be a way to resolve the crisis, but the stakes were very high. The escalated geopolitical tensions kept the losses in gold in check for the day.

Gold (XAU/USD) Technical Outlook

Gold is advancing within a three-month-old symmetrical triangle, recently piercing a six-week-long horizontal area. The metal’s successful trading above the 200-day moving average and a five-week-old horizontal area, combined with recently firmer MACD and RSI signals, adds to the metal’s upside bias. Nonetheless, the 23.6 percent Fibonacci retracement (Fibo) of September-November upside near $1,841 serves as an intermediate halt during the run-up to the stated triangle’s resistance line around $1,850. If gold buyers manage to break through the $1,850 barrier, January’s high near $1,853 will test the upside momentum, with a late 2021 peak of $1,877 as the target.

On the other hand, pullback moves remain elusive until the price holds above $1,830, a break of which will direct gold sellers towards the 200-DMA near $1,806. Following that, the 50 percent Fibo level and the triangle’s support, located around $1,800 and $1,787, respectively, will be critical for gold bears to retake control. Good luck!