The XAU/USD pair (gold price in terms of USD) paused its three-day rally and settled in the red on Tuesday, retreating sharply from fresh four-week highs reached at 1262.77 in the European hours. Gold prices came under fresh selling pressure after the oil prices jumped higher and spurred a renewed risk-on wave across the financial markets, lifting the stocks on the Wall Street. Crude oil prices rebounded higher on the back of reports of output freeze consensus reached between Saudi and Russia. The bullion dropped as low as 1251.15 post-US open, before recovering some ground to end the day at 1254.11. The prices corrected lower after hitting multi-week highs, as markets preferred to lock-in gains ahead of the Chinese trade due for release on Wednesday.

On Wednesday, the yellow metal extended its bearish momentum for the second consecutive session, as the persisting risk-on trades received fresh impetus from strong Chinese exports and imports data, which eventually weighed on the safe-haven demand for gold. The risk-on rally seen in the global equities, despite weaker oil prices, further dampened the sentiment around the precious metal. Also, markets prefer to hold the US currency heading into the US retail sales report and PPI data due to be published later in the NY session. The upcoming US data is expected to come in stronger and may back the case for a June rate hike, thereby, putting rest to the uncertainties surrounding the Fed rate hikes this year.

Technicals – Rising wedge bearish break on hourly charts, looks to test $ 1235-1230

The hourly chart for gold displays a clear bearish picture, with the prices having displayed a rising wedge bearish break earlier on the day. The prices breached the 100-SMA support located at 1246.99 and now hover close to the session lows near the last. The metal dropped below all major hourly moving averages and now seems poised to test the hourly 200-DMA support placed at 1235.54 to the downside, should the US retail sales and PPI data beat estimates. Adding to the downbeat sentiment around the bullion, the hourly RSI points sharply lower and remains in the bearish territory, while the volumes are seen moderately higher, confirming that downside bias is in favour of gold. The upside looks limited given the bearish pattern formation on the 1 hour chart, although if the prices manage to hold the hourly 200-SMA support, we could see a bit of a bounce towards $ 1260 levels ahead of the US CPI report. A breach of the last key support , the prices could drop further to test the next strong support of the upward sloping 50-DMA located at 1231.16, below which 1225 levels could act as the next barrier guarded by the bulls.

XAUUSD


 

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