Gold prices have somewhat stabilized following yesterday’s whipsaw price action. Gold came within a whisker of the psychological $2050 handle before a brisk selloff saw the precious metal end the day in the red.
Gold prices have continued to retreat this morning as the Dollar Index (DXY) hit a fresh one-week high. Gold is precariously poised at the minute with growing uncertainty around a global recession keeping the precious metal supported. Gold seems unable to push convincingly above the $2050 level with a growing case from a technical perspective for bearish interest. The Bears defended the $2050 level yesterday, but any follow-through continues to be negated by a safe-have appeal.
Yesterday’s US CPI Data was positive for market participants eyeing a pause in Fed rate hikes. Markets are now pricing around a 94% probability of a break but consensus on rate cuts in the second half of 2023 continues to be a point of contention driving the US Dollar. This is also reflected in the uncertainty of the late gold moves with a lot of whipsaw price movements by the precious metal.
Chinese inflation data didn’t do much for Gold prices as they came in mixed with headline CPI in China rose by 0.1% in April, the lowest rate since February 2021, and missing forecasts of 0.4%. Chinese PPI data contracted for the seventh consecutive month and registered its fastest drop since May 2020. There have been continued rumblings around the speed and strength of the Chinese recovery, with today’s inflation data likely to add further uncertainty. A ramp-up in global recessionary fears will weigh positively on Gold prices.
There is not much to look forward to on the calendar today, but US PPI is likely to be interesting. Producer price increases will provide a snapshot into the possibility of a rise or further declines in US inflation in the months ahead and could result in some movement in the DXY and, thus, Gold.
TECHNICAL OUTLOOK AND FINAL THOUGHTS
From a technical perspective, Gold price action has been overshadowed by overall market sentiment and haven demand. Many technical setups of late have failed as market sentiment continues to turn on a dime. Bear this in mind when taking any position at the moment.
Yesterday, the daily candle print, a doji candle, closed with a new lower high, hinting at a further downside. The early European session has seen a push lower for the precious metal trading around $2024 at the time of writing. For bears to seize control, the precious metal must gain acceptance below the $2000 handle, which aligns with the bottom end of the ascending channel. A close below could bring the 50-day MA into consideration around the $1968 mark.
Alternatively, a push higher would need a daily candle close below the $2050 mark to invalidate the bearish bias. Gold could finally push beyond its all-time highs and clear the $2100 mark.
There is much to consider with gold prices as the momentum continues to shift back and forth. Do not marry a bias and remain agile to any unforeseen changes which may and at this stage appear likely to occur.