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Gold Price Looks For Breakout Signals As Dollar Fights to Hold On to Gains

Gold price was within a tight range in the mid-morning London session on Friday, as traders haggled around the $2,030 level. Spot gold was trading at $2,031 at 12:00 PM GMT, having shed -0.12% of the opening price. The gold market experienced high volatility on Thursday, swinging between $2,051 and $2034, before closing at $2,039 at the COMEX futures market.  However, the GVZ Index, which measures the volatility of gold over the next 30 days, is currently at 11.71, signaling overall low volatility.

After last week’s rally that saw it gain +1.05%, to average $2,039 at the spot market, gold price has stuck within a tight range, spending most of the week below $2,040. Furthermore, it went as low as $2,014 on Monday, and seems to have found psychological support at $2,030.

The US dollar has been performing better than major assets in the financial markets since last week, buoyed by strong US economic data output. However, XAUUSD has been heading sideways for the last three days, as the market consolidates, with the dollar making small gains. This will likely change heading into the new week, as a number of high-impact fundamental shifts take place.

The most definite of the market fundamentals is Tuesday’s US Consumer Price Index (CPI) data release. A figure above the consensus 0.3% rise in consumer prices for January will buttress the Fed’s hawkish rhetoric, to the benefit of the dollar. However, a figure comes below the projection will be a step towards helping achieve the Fed’s target 2% inflation rate, thus helping create a bullish sentiment around gold.

The other potential market mover could come from the Middle East if Israel makes good its intention to send ground troops to Gaza’s Rafar city. Such a development would trigger a risk-off sentiment, exerting downward on gold.

Technical Analysis

The RSI is neutral, signaling a likelihood of minor moves on either side of the $2,027 pivot level. Action above $2,027 will signal bullish control, with the first target at $2,038. Further gains beyond that point will push the target to $2,044. In the alternative, movement below $2,027 will signal control by the sellers, and a crossing below $2,022 will invalidate the bullish view. Further losses will likely see a second support established at $2,017.

XAUUSD 30 minute chart