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A Look at XAUUSD As Gold Price Claws Back Against the US Dollar

Gold prices have continued last week’s gains in the late-morning London session, gaining +0.30%, to go for $2,030 an ounce at the COMEX futures market at 11.00 am UTC. Spot gold traded at $2,018, after rising by +0.28%. XAUUSD is pushing for its third consecutive day of gains after previous six consecutive days of losses, which saw it break below the $2,000 psychological support level.

XAUUSD will likely continue building its upside momentum, propelled by the lull in the US markets, which are closed for the President’s Holiday. The market seems to have come to a consensus that a Fed rate cut is unlikely to come before June, thanks to economic indicators that point to stubborn inflationary pressures.

The latest inflation indicators are from Friday’s PPI figures, which showed that the cost of production rose by 0.3% in January, beating the projected +0.1% growth and reversing the -0.1% decline in December. The mixed signals by key inflation indicators are likely to be cited in the FOMC minutes scheduled for release on Wednesday, with the Fed expected to emphasise a focus on bringing inflation down to 2%.

Elsewhere, China’s economy has opened for business after a week-long closure for Lunar New Year celebrations. The country’s economy is struggling to fend off negative sentiment around its stock markets. Therefore, continued underperformance by Chinese stock markets this week could potentially boost gold prices, as investors seek safe haven assets away from the stock market. Furthermore, Chinese central banks could seek to boost their gold reserves as a precaution against wider economic shocks.

Technical analysis

Gold price will likely pivot at $2,011, with the bullish RSI favouring upside momentum. A buyer-controlled market will likely push the XAUUSD pair to target $2,029 from the pivot. A break beyond that point could meet the second resistance at $2,033. However, if the bulls lose their buying momentum, the sellers will seek to break the $2,007 support. A break beyond that point will support further bearish momentum, invalidating the bullish view and possibly pulling the support lower to the $2,002 level.

Gold price on a 30-minute chart