• A combination of factors assisted gold to gain some positive traction on Friday.
  • The risk-off mood and retreating US bond yields acted as a tailwind for the precious metal.
  • Hawkish Fed expectations underpinned the USD and capped any further gains.

Gold attracted some dip-buying on the last day of the week and for now, seems to have stalled the previous day's retracement slide from a two-month high. Investors turned risk-averse amid concerns that rising borrowing costs could dent the earnings outlook for companies. This was evident from a weaker trading sentiment around the equity markets, which, in turn, acted as a tailwind for the safe-haven precious metal.

Meanwhile, the flight to safety dragged the US Treasury bond yields further away from the multi-year high and extended additional support to the non-yielding yellow metal. It is worth recalling that the yield on the benchmark 10-year US government bond shot to the highest level since January 2020 on Wednesday amid expectations for a faster policy tightening by the Fed. Investors seem convinced that the Fed would begin raising interest rates in March to combat stubbornly high inflation and have been pricing in the possibility of a total of four rate hikes in 2022.

The market bets were reaffirmed by last week's data, which showed that the headline US CPI surged to the highest level since June 1982 and core CPI registered the biggest advance since 1991. The prospects for an eventual Fed lift-off continued underpinning the US dollar and should hold back traders from placing aggressive bullish bets around the dollar-denominated commodity. Investors might also prefer to move on the sidelines ahead of the upcoming FOMC meeting on January 25-26, warranting caution before positioning for any further appreciating move.

The outcome will be looked upon for clearer signals about the likely timing when the Fed will commence its rate hike cycle. This will influence the near-term USD price dynamics and provide a fresh directional impetus to the XAU/USD. In the meantime, gold is more likely to consolidate in a range amid absent relevant market moving economic releases from the US. That said, the broader market risk sentiment might still produce some short-term trading opportunities around the metal, which remains on track to post gains for the second successive week.

Technical outlook

From a technical perspective, the overnight break through the $1,830-$1,832 resistance zone might have already set the stage for additional gains. Hence, a subsequent strength towards testing a downward-sloping trend-line extending from June 2021 swing high, currently around the $1,860 region, remains a distinct possibility. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for an extension of the recent move up witnessed over the past one month or so.

On the flip side, any pullback towards the $1,832-$1,830 resistance breakpoint might now be seen as a buying opportunity. A convincing break below might prompt some technical selling and accelerate the fall towards the $1,812 horizontal zone. The next relevant support is pegged near the very important 200-day SMA, currently around the $1,804 region, ahead of the $1,800 round figure. This is closely followed by an upward sloping trend-line extending from August 2021 swing low, currently around the $1,790 region. Failure to defend the mentioned support levels will negate the near-term positive bias and turn gold prices vulnerable.

fxsoriginal

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD struggling to retain the 0.6900 mark

AUD/USD struggling to retain the 0.6900 mark

Wall Street plunged on Tuesday, dragging AUD/USD lower as the greenback benefited from the risk-averse sentiment. Softening gold prices weighed further on the aussie, now approaching its June lows. Australian Retail Sales in the docket.

AUD/USD News

EUR/USD nears 1.0500 amid inflation and recession concerns

EUR/USD nears 1.0500 amid inflation and recession concerns

The EUR/USD pair bounced modestly from a Tuesday’s low of 1.0502, maintaining a near-term bearish bias amid concerns related to economic growth and central banks’ actions to tame inflation. US core PCE inflation and German CPI coming up next.

EUR/USD News

Gold: Can the dollar finally win the battle?

Gold: Can the dollar finally win the battle?

XAUUSD is technically bearish and could soon lose the $1,800 level. Gold retains the sour tone on Tuesday, now trading at around $1,823.00 a troy ounce. The dollar seesawed between gains and losses, turning higher after the release of discouraging US data.

Gold News

Summertime bull-run a multi-year bear market?

Summertime bull-run a multi-year bear market?

The cryptocurrency market is in a historical pivotal moment. One good trade could replenish all losses, while one bad trade could be catastrophic.

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures