Gold Daily Update: Why $1,920 Could Drive Downtrend

During the Asian session, XAU/USD remains subdued as the session begins, while the US dollar remains in the hands of the bulls while above 98.50 on the DXY index. Gold is trading at $1,925, flat on the day, after opening lower at $1,921.48. Following last Friday’s mixed Nonfarm Payrolls data and rising Treasury yields on expectations of a hawkish Federal Reserve and subsequent US interest rate hikes, the dollar made a strong start to the week. Furthermore, there has been talking of Russian gas bans, which have kept the euro near its 2022 lows.

Tea GOLD price starts the Asian session on the back foot, with a low in the open of $1,924.27. The yellow metal finished the day down 0.62 percent at $1,925 and has ranged from a high of $1,939.62 to a low of $1,918.10. Investors must weigh the risks of a protracted war in Ukraine as peace talks stall and a US recession against a hawkish backdrop at the Federal Reserve.

While safe-haven demand and massive ETF inflows provide a strong counterbalance, keeping prices above CTA liquidation thresholds near $1830/oz, the drag of a hawkish Fed backdrop increasingly weighs on the yellow metal’s upside momentum.

XAU/USD

Nonfarm payrolls in the United States were solid in March, according to data released on Friday. Last month, 431,000 jobs were added, falling short of estimates of 490,000, though data for February job gains were revised higher.

On the other hand, the unemployment rate fell to 3.6 percent, the lowest since February 2020. This has boosted the value of the US dollar. The greenback was higher for the second day in a row, as measured by the DXY index, after two straight days of declines and is trading near 98.50. This month’s cycle high near 99.418 should be tested at some point. The US dollar is bid at the open on Monday and is currently trading in the 98.60s.

Furthermore, Reuters reported that futures contracts tied to the Fed’s policy rate fell following the jobs report, indicating that the Fed is expected to hike by a half-percentage point at each of its next three meetings to deal a more decisive blow to price pressures. This would come after a quarter-point increase on March 16, when the Fed began a new tightening cycle.

Gold (XAU/USD) Technical Analysis

Technically, the commodity’s inability to gain meaningful traction and acceptance above the 100-period SMA on the 4-hour chart favors bearish traders. However, repeated failures to find acceptance below the $1,900 level suggest that it is prudent to wait for some follow-through selling before confirming the bearish outlook. Meanwhile, the $1,914 area may provide immediate support ahead of the $1,895-$1,890 region. A convincing breakthrough in the latter would pave the way for a drop towards the next relevant support near $1,872-$1,870.

On the other hand, the overnight high, around $1,950, should limit the immediate upside. Sustained strength above $1,964-$1,966 could spark a short-covering rally, pushing gold prices to an intermediate hurdle near $1,964-$1,966. The momentum could be extended further towards the next relevant barrier, which is likely to be around the $1,985-$1,988 region, above which bulls may aim to reclaim the key $2,000 psychological mark.

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