Bulls Face a Challenge Ahead US PCE Data

GOLD (XAU/USD) PRICE, CHARTS AND ANALYSIS:

READ MORE: US Dollar Price Action Setups: AUD/USD, EUR/USD, USD/JPY, GBP/USD

Gold (XAU/USD) FUNDAMENTAL BACKDROP

Gold prices declined yesterday printing a fresh low around the $1817 mark in the US session. Overnight buying pushed the precious metal back toward the $1825 handle with the European open facilitating further declines (trading at $1820 at the time of writing).

Gold bulls remain sidelined at present with the dollar keeping any attempted move to the upside in check. The dollar index has surprisingly continued its move higher despite further rate hikes and a higher peak rate from the US Federal Reserve largely priced in by market participants. Gold appears to be in need of a catalyst if we are to see an upside bounce be sustainable at this stage as we have seen repeated attempts at a push higher this week halted by dollar strength.

Currency Strength Chart: Strongest – GBP, Weakest – AUD

Source: FinancialJuice

Later today we have a host of US data releases and a few Fed policymakers speaking. This does not bode well for gold prices as yesterdays revised PCE number and positive jobs data hint at continued strength in the US economy which could be confirmed further by the final Michigan Consumer Sentiment number. The key lies with the PCE data (Fed’s preferred gauge of inflation) with forecasts eyeing a print of 4.3%. Should we get a higher print gold could face a further challenge and retest the weekly low at $1817 and potentially head toward the $1800 Handle.

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TECHNICAL OUTLOOK

From a technical perspective, Gold is on course for its fourth consecutive day of losses. The RSI is however approaching oversold territory and downside momentum does seem to be on the wane with yesterday doji candle close hinting at potential for reversal.

A daily candle close above yesterday’s high at $1834 is needed if we are to see further upside while immediate intraday resistance rests at $1825 and the $1830 handles respectively. Alternatively, a push lower may find resistance at the weekly low of $1817 and further down the key psychological $1800 mark.

Gold (XAU/USD) Daily Chart – February 24, 2023

Source: TradingView

IG CLIENT SENTIMENT DATA

IGCS shows retail traders are currently LONG on XAU/USD, with 74% of traders currently holding long positions. At DailyFX we typically take a contrarian view to crowd sentiment and the fact that traders are LONG suggests that XAU/USD may fall.

Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda