Article by: ETO Markets
Gold (XAU/USD) continues its decline for the second consecutive day, hitting a two-week low around the $…-… region during the Asian session on Friday. The US Dollar's (USD) recovery from its lowest level since December 10 is adding pressure to gold, fueled by expectations that the Federal Reserve will maintain its hawkish stance due to persistently high inflation. The strengthening USD is prompting flows away from the non-yielding yellow metal. Traders are awaiting the release of the US Personal Consumption Expenditure (PCE) Price Index data, which will provide insights into the Fed's potential rate-cut path. Despite this, ongoing uncertainty around US President Donald Trump's tariff plans, along with a risk-off sentiment in the market, could support gold as a safe-haven asset. Global market concerns are also driving down US Treasury yields, which could help limit gold's losses. Economic data, including a 2.3% GDP growth rate for Q4 2024 and rising inflation, further underpin the USD and diminish gold's appeal. The Fed's cautious stance on inflation continues to steer investor sentiment away from gold. With more tariff threats from Trump on the horizon, gold may find some support from heightened economic uncertainty.
From a technical perspective, the recent decline in gold (XAU/USD) has pushed the price below the 23.6% Fibonacci retracement level of the December-February rally. Oscillators on the daily chart are showing negative momentum, supporting the view of a continued corrective pullback from the all-time high. If the price breaks below the $…-… horizontal zone, it would confirm the bearish outlook, sending the price toward the next support level at $…. Further downside movement could lead to the 38.2% Fibonacci level around $…-…, followed by the $… mark. A decisive break below $… would signal a potential top for gold and open the door to more significant losses. On the other hand, if gold recovers and moves above the $… area (23.6% Fibonacci level), the first resistance zone would be around $…, followed by $…. A sustained move above $… could propel gold toward the $… area, with a further rally potentially targeting the all-time high around $…, encountering resistance at $… along the way.
