Gold, Chart of the Week: XAU/USD bulls remain in control

The Gold price ended Friday lower by some 0.5%, dropping from a high of $1,987.50 and hitting a low of $1,966.81 despite Friday’s economic news that showed the US Feb core PCE deflator, the Federal Reserve’s preferred inflation gauge, rose less than expected.

The data was raising hopes that Fed rate hikes may be close to ending. However, metals prices Friday fell back from their best levels, with the Gold price falling into negative territory after the US Dollar rallied on month and quarter-end flows. 

Gold prices have gained for two consecutive quarters, posting the largest cumulative percentage gain since the six-month period ended September 2020 and with investors continuing to worry that the recent bank industry crisis will reduce lending in the US, and interest rate sensitive sectors are set to experience a difficult period, investors decided that gold is unlikely to drop lower, analysts at TD Securities explained. 

´´As such, money managers aggressively covered their short exposure. As rates fell and the US dollar weakened, specs used the yellow metal to protect purchasing power by taking on new large long positions,´´ the analysts said.

´´Gold is set to test recent highs near $2,000 amid lower-than-expected PCE inflation and possible new economic weakness. However, the market looks to the March payrolls to decide if next week is the time to take gold to recent highs.´´

Gold weekly chart

The Weekly chart´s W-formation has seen the Gold price duck towards the neckline. There could be some more to go but there has already been a 38.2% Fibonacci correction. 

Gold daily chart

We have a bullish pennant on the daily and 4-hour charts:

Gold H4 chart

Gold H1 chart

On the lower timeframe, the supporting trendline is being pressured but so long as the majority of the trend remains intact, the bullish pennant will remain valid.