- Gold price sets off the week on a wrong footing as the US Dollar cheers risk-off flow.
- United States inflation and Federal Reserve decision hold the key this week.
- Gold price is pulling back before resuming the upside above the $1,800 mark.
Gold price is dropping for the first time in five trading days on Monday, kicking off the week on a negative note. Investors prefer to hold the United States Dollar (USD), in what seems to be a decisive week for the market.
United States Dollar sees resurgent demand
The US Dollar is recovering again above 105.00 against its major rivals, weighing heavily on the USD-priced Gold, as bears run into fresh supply just below the $1,800 mark. Risk-aversion seeps back into the market at the start of the week as investors turn unnerved, bracing for the United States Consumer Price Index (CPI) and the US Federal Reserve (Fed) rate hike decision. These two events from the United States will hold the key to determining the next direction in Gold price. The US Consumer Price Index will be published on Tuesday. It will likely confirm signs of peak inflation in the American economy, with the Core and headline figures easing in November.
Cooling inflation in the United States could prompt the US Federal Reserve to slow further down its tightening cycle. The US central bank is widely expected to hike policy rates by 50 basis points (bps) on Wednesday. However, the Federal Reserve’s Dot Plot Chart and Chairman Jerome Powell’s press conference will be closely scrutinized for the central bank’s policy path in 2023. The Dot Plot chart will project the Federal Reserve’s terminal rate, which is expected at 5.0% by the end of 2023.
On Friday, the US Dollar spiked briefly after the Producer Price Index (PPI) rose faster than expected in November, arriving at 0.3% MoM vs. 0.2% expected. The University of Michigan's (UoM) Preliminary Consumer Sentiment rebounded while the Inflation Expectations fell 4.6%, its lowest since September 2021. Mixed economic data from the United States failed to keep the US Dollar upside intact, allowing Gold price to hold firm on Friday.
Gold price fails to draw support from falling US Treasury bond yields
Gold price failed to attract buyers this Monday, despite the extended weakness in the US Treasury bond yields across the curve. Uncertainty over the Federal Reserve rate hike outlook and growing recession fears in the United States is boding ill for the US Treasury bond yields. Still, the non-yield Gold price underperforms amid a broadly stronger US Dollar. Should risk-off flows intensify, the US government bonds could draw additional demand as a safe haven, weighing further on the US Treasury bond yields, which could help Gold price find a floor.
With no top-tier United States economic data slated for release on Monday, all eyes will be on risk sentiment and the US Dollar price action, as markets could reposition ahead of the critical United States events, Bank of England (BoE) and European Central Bank (ECB) monetary policy announcements.
Gold price technical analysis: Daily chart
Despite closing the week above the mildly bearish 200-Daily Moving Average (DMA) at $1,791, Gold sellers returned on Monday.
Gold price is below the 200DMA barrier, with bears eyeing Thursday’s low at $1,781 as the next downside target.
Further south, the moderately bullish 21DMA support at $1,768 could come into play.
The 14-day Relative Strength Index (RSI) has turned lower but holds comfortably above the midline, suggesting that any pullbacks in Gold price could be a good buying opportunity.
On the upside, the immediate resistance is seen at the 200DMA, above which buyers will yearn for a sustained move beyond the $1,800 threshold.
Gold price will then see fresh buying opportunities for a test of Friday’s high at $1,806.
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