During yesterday's trading session, the price of gold rose from its lowest level in more than two years, as the dollar fell after setting a new record. The XAU/USD gold price recorded the level of $1642 an ounce before retracing the general trend to the support area of $1615 an ounce at the time of writing the analysis. Yesterday, bullion prices rose by 1.1%. While gold is seen as a traditional haven in times of economic distress, fears of a global economic recession fueled by monetary tightening of global central banks have instead led to significant gains in the dollar.
Focus Remains on Dollar Strength
The decline in other major currencies including the pound and the yen may continue to pressure dollar-priced commodities. Energy and raw materials markets were also hit hard with the Bloomberg Spot Commodities Index falling to its lowest level since February. "The focus remains on the strength of the dollar, and it may continue to put the burden on the precious metal," said Gnanaskar Thiagarajan, director of risk management services for Commtrendz. He added that sentiment remains very negative as "further rate hikes to tame inflation will affect gold's safe-haven status," adding that he expects bullion prices to head towards $1,550 an ounce in the coming weeks.
This week, the market could face fresh volatility from the release of US inflation data and public speeches by Fed officials including Vice President Lyle Brainard and New York Fed President John Williams.
Gold is in a bear market after falling 20% from the 2020 record, driven by investors liquidating their positions in exchange-traded funds and futures markets. Previously holdings are now near their lowest levels this year, after a sharp rise in the wake of Russia's invasion of Ukraine.
XAU/USD Gold Price Forecast Today:
- XAU/USD gold price may face the risk of slipping to the vicinity of the psychological support level of $1600 an ounce.
- This is in the event that investors continue to buy the US dollar strongly amid expectations of raising US interest rates.
- There is no doubt that moving towards the level will push the technical indicators towards strong oversold levels.
- Buying can be considered waiting for a rebound from the support levels of 1582 and 1555 dollars an ounce with no risk.
On the other hand, according to the performance on the daily chart, the price of gold needs to breach the $1700 resistance to return the bullish look to the gold path again.
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