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Gold Price Analysis: Safe Haven Buying Slows Down, Giving the Dollar A Breather

Gold prices have eased their upsurge on Wednesday as the market goes slow in views of an anticipated testimony by Federal Reserve Chairman, Jerome Powell. The safe haven asset registered a record price of $2,150 an ounce on Tuesday, but has since eased back to trade at $2,134 at the futures market at the time of writing. Meanwhile, spot gold traded at $2,128.

Growing confidence that the US will cut its interest rates in June have helped fan gold prices. The US economy started the year with robust macroeconomic data in January, but recent results signal that things may not be as rosy. February saw multiple printouts of lower-than-expected data, raising concerns that higher-for-longer interest rates could hurt the economy.

There have been growing calls for the Fed to ease the current 5.25-5.5% rate, with some FOMC members sounding less hawkish over the past two weeks. However, there’s the pressing issue of high inflation rate, which remains above the Fed’s preferred 2%.

The latest sign of a not-so-strong US economy came from successive misses in the Manufacturing and Services PMI readings. After missing the forecast figure for the February ISM US Manufacturing PMI on Friday, the ISM Non-Manufacturing PMI reading released on Tuesday also missed the mark, coming in at 52.6, against a forecast of 53.0.  Also, the ISM Non-Manufacturing Prices index missed the 62.0 forecast to come in at 58.6. These are not only expected to weigh down the dollar, but also bring more safe have investments into gold.

Meanwhile, US Treasuries have seen their yields fall over the past week. Gold competitor assets are yielding 4.15% as of this writing on the benchmark 5-year and 10-year bonds. This could also help propel gold prices higher. However, in the meantime, gold buyers are likely to hold their horses as they wait to hear from Federal Reserve Chairman Jerome Powell. His two-day testimony in Congress starting Wednesday will include a Q&A session and could bring volatility in the markets.

Technical analysis

Gold price has pivoted at 2120 and the bulls will be in control as long as the price stays above that level. With the bulls in control, they will likely meet resistance at 2141. A break past that level will set their eyes on the psychological barrier at 2150. However, movement below 2120 could put the sellers in charge, with the first support at 2110. Extended bearish control could see them aim lower at 2095.