XAU/USD (gold price in terms of USD) ended last week down -2.60% and gave up nearly $ 60 from yearly tops reached earlier this month above $ 1280, after a string of hawkish comments from Fed official pointed towards a Fed rate hike as early as next month. Hence, growing Fed rate hike expectations in the upcoming months (April & June) boosted the rally in the greenback against a basket of currencies at the expense of the non-interest bearing gold. Gold prices witnessed the sharpest weekly fall in four months in the last week, extending its downward spiral, after having displayed a rising wedge bearish break on March 15.
As for today’s trade so far, the yellow metal stalled the recovery from one-month troughs just ahead of $ 1218 levels and now drifts lower to 1215 mark as the USD bulls remain in command as focus now remains on the US data flow due later in the NY session, particularly after the US Q4 GDP revision positively surprised markets. Later today, from the US docket we have the Fed’s preferred gauge PCE index, pending home sales, goods trade balance and personal spending data. Besides, gold’s recovery lacks momentum as volumes remain very light as the European traders rejoice the Easter holiday. Besides, rising Fed rate hike expectations also keep the yellow metal pressured, with the CME Group FedWatch tool now showing Fed rate hike chances at its April 27 meeting at 14%, markedly up from exactly a zero change seen a week ago. In the day ahead, a minor correction to the upside can be ruled in the prices ahead of the US economic updates, which could come in stronger than estimates and weigh heavily on the precious metal.
Technicals –Eyes 50-DMA just ahead of $ 1200 on upbeat US data
The daily chart for gold clearly indicates further downside potential in store heading into the NFP week. The rising wedge pattern target at $ 1190 still remains in place, below a break of the crucial 1200 – psychological levels, where the upward sloping 50-DMA is located. In case the data fails to add to the April/ June Fed hike expectations and hence, leaves the bulls unimpressed, we could see the prices swing back to daily highs, beyond which upside opens up for a test of the heavily bearish 5-DMA placed at 1224.05. Overall, the risk remains more towards the downside going forward.
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