XAU/USD (gold price in terms of USD) ended a 2-day climb and dropped on Friday from near $ 1240 mark, booking the first weekly loss in more than a month, as the resurgence of risk-on environment combined with broad USD strength underpinned the precious metal. However, the downside remained capped on the back of dwindling bets of further Fed rates rises this year and also as gold to oil ratio hit record-highs last week. Data-wise, the upbeat US CPI figures also added to the positive sentiment around the greenback, and thus, weighed heavily on the bullion. The CPI was unchanged in January, rather than showing a 0.1% decline as expected by the market. While the core figures outpaced expectations and hit a 3.5 year high in last month.
At the moment, the gold prices are seen trading in the lower-bound of today’s trading range near daily lows reached at 1211.70. The prices dropped for a second day today after a renewed bout of optimism hit markets following sharp gains seen on the Asian stocks alongside oil and industrial metals. Further, the persistent favourable risk environment continues to lend support to the risk currency USD, with the DXY higher to the tune of +0.36% at 97 levels. In the day ahead, the second-liner data in the form of the US flash manufacturing PMI will be reported, which is likely to have limited data on gold. Hence, the risk remains to the downside going forward as the greenback is likely to remain strongly bid amid risk-on market profile.
Technicals – Breaches key support near $ 1215
On daily charts, the prices are seen breaking lower, breaching a strong support placed ahead of 1215 levels, the confluence of 5 & 10-DMA. The daily RSI aims sharply lower near 64, suggesting further room for declines. Hence, to the downside, the prices find the immediate support at 1200 levels, convergence of Feb 18 low and the key psychological levels. A break below the last, the prices could head for a test of $ 1190 – Fib 38.20% support (retracement of Jan 14 low-Feb 11 high). On the flip side, if the prices manage to resist $ 1200 mark, a rebound could be expected towards the support-turned resistance located near 1215 levels and from there to daily highs printed at 1226.26.
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