XAU/USD Current price: $1,917.83
- Fed, BoE and ECB raise key interest rates, more to come.
- Despite outlook and a sharp decline in bond yields, gold tumbles.
- XAU/USD under pressure ahead of Friday’s Asian session and NFP report.
Spot gold reached $1,959 on Thursday, the highest level since mid-April and then dropped sharply, losing all post-FOMC gains, approaching $1,910. The move lower took place amid a recovery of the US Dollar across the board in a volatile session. Markets are still digesting monetary policy meetings while, at the same time, getting ready for the US official employment report due on Friday.
US stock indexes are up, extending the FOMC rally. Financial markets are not moving in tandem on Thursday and are not reacting as central bankers would like. The European Central Bank (ECB) raised rates by 50 basis points. President Christine Lagarde said the bank intends to raise them again by 50bp in March. Lagarde sounded hawkish, but the markets are reacting with a rally in bonds. The German 10-year yield is having one of the biggest declines since 2011 with the rate down from 2.29% to as low as 2.04%. US bond yields are also lower, falling for the second day in a row. The correlation between gold and yields did not work as usual.
The sharp decline in gold, of more than $30 from the monthly highs, looks like a reversal but is still too soon to tell, and Friday is NFP’s day. A volatile environment does not bring clarity to the outlook. What is happening in the European bond market comes as a surprise, and some reactions could soon trigger new moves in bonds and commodities.
XAU/USD price short-term technical outlook
XAU/USD is holding below the $1,920 technical area, confirming a deterioration in the short-term outlook. As long as gold remains under the $1,920 level, a slide toward $1,900 is on the cards. The daily chart shows the 20-day Simple Moving Average (SMA) awaiting at $1,913. A daily close below would be the first one since early November and a negative sign. A slide below $1,900 could open the door to a deeper correction, targeting the $1,882 zone.
In the near term, if XAU/USD manages to recover levels above $1,920, it would alleviate the current bearish pressure. The 4-hour chart offers a negative bias for gold. Technical indicators head south, breaking recently below their midlines. Key moving averages are still heading north, but price has fallen below the 20 and 100 SMAs.
Support levels: 1,910.00 1,896.50 1,882.50
Resistance levels: 1,935.70 1,950.65 1,966.15
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