The XAU/USD pair (gold price in terms of USD) extended its bearish run for the third day in a row on Thursday, breaching the hourly 200-SMA support then located at 1235.54 to hit daily lows at 1223.80, before recovering some ground to close the day at 1229.30. The metal gave a daily closing below crucial 50-DMA support at 1232.50 and remained heavily offered, with the bulls failing to find support from poor US inflation report. The bullion took a beating for the third straight session on the back of extended broad based US dollar advance and risk-on rally in the global equities. A number of Fed officers hit the wires over the past week and hinted at atleast 2-3 rate hikes this year, which weighed heavily on the non-interest paying gold.
The yellow metal attempted a tepid-bounce from ahead of 1220 levels this Friday, although remains set to book first weekly loss in three. However, over the last few hours, the prices are seen oscillating in a tight range amid subdued trading on the global equities and a broadly mixed US dollar. The calm has spread across the financial markets as traders remain unnerved and refrain from creating fresh positions ahead of this Sunday’s oil producers’ meeting held in Doha to reach a deal on output freeze. Looking ahead, the bullion also awaits fresh incentives from a fresh batch of US macro data due later in the NY session for further direction. The US calendar offers the industrial production, consumer sentiment and regional manufacturing index for the gold traders. Markets are expecting the US economic releases to put up a positive show, providing renewed impetus to the greenback at the expense of gold.
Technicals – Gold could drop further to test $ 1220 once again
The hourly chart for gold displays a clear bearish picture, with the prices having displayed a head and shoulders bearish breakout earlier today. The metal trades below most major hourly moving averages, while the RSI lies below the mid line and aims lower, suggesting further scope for declines. Should the US data better estimates, we could see the prices tumbling to $ 1220 support, below which selling pressure will intensify drowning the bullion to March lows around 1207 levels. A break below the last, the prices could sink further for a test of $ 1200 – key psychological mark. In case the data surprises to the downside and weighs on the Fed rate hike prospects, gold could witness a minor rebound towards hourly 200-SMA now located at 1239.04. However, the upside looks limited looking at the technical set up on the 1hr charts.
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