The price of gold receives a degree of support from rising geopolitical tensions in the Middle East. Additionally, the decline in US bond yields proves advantageous for XAU/USD, although the upward movement lacks sustained momentum. Traders exhibit caution as they approach the pivotal two-day Federal Open Market Committee (FOMC) monetary policy meeting.
According to the analysis of the daily chart, the trajectory of the Gold price indicates a potential challenge to the crucial supply zone at $2,030. This level marks the confluence of the 50-day Simple Moving Average (SMA) and the 21-day SMA.
For a substantial recovery, Gold buyers aim for a daily candlestick closing above the latter, paving the way towards the static resistance near the $2,038 level. Further upward, the psychological barrier of $2,050 could become relevant.
Despite these considerations, the 14-day Relative Strength Index (RSI) remains below the midline, signaling a cautious stance among Gold buyers.
Furthermore, there’s a notable development as the 21-day SMA is on the brink of crossing below the 50-day SMA, indicating a potential Bear Cross if this occurs.
On the downside, immediate support is evident at the rising trendline at $2,011, below which a retest of the $2,000 barrier is likely. The subsequent strong downside target is around the $1,975 region.
Investors began a critical week cautiously, marked by the upcoming US Federal Reserve (Fed) policy announcements. A Reuters report quoting US President Joe Biden and officials revealed that three US service members were killed and dozens potentially wounded in an unmanned aerial drone attack on US forces near the Syrian border in northeastern Jordan. Biden attributed the attack to radical Iran-backed militant groups in Syria and Iraq, asserting that those responsible would be held accountable.
This development set a cautious tone for the markets, with concerns about the US response to the Iran-backed militia escalation. Meanwhile, anticipation of the Fed interest rate decision on Wednesday added to the apprehension. Gold prices initially rose in response to heightened geopolitical risks but faced resistance as the demand for the US Dollar increased as a safe-haven asset.
The recent string of robust US economic data tempered expectations for a March Fed rate cut, acting as a deterrent for gold, which lacks interest rate-bearing characteristics. The market now prices in a 48% probability of a March rate cut, down from 60% a week ago.
Optimism about additional stimulus from China waned as concerns resurfaced about the country’s property market, particularly with a Hong Kong court ordering Ever grande, the world’s most indebted property developer, to liquidate.
Gold prices may find ongoing support if a risk-off sentiment intensifies, leading to increased safe-haven flows into US government bonds and further declines in US Treasury bond yields. The weakening US Dollar, currently affected by a 0.70% loss in the 10-year benchmark US yields, could also contribute to gold’s support.
With a relatively light US economic docket on Monday, geopolitical developments and pre-Fed positioning are expected to influence gold price action.