XAU/USD: Price action limited yet fundamental thrive

Gold moved higher in the previous week, practically breaking the downward momentum that was formed since late January. Even though the past week could have been an awakening for the Gold buyers, the trend has not changed and prices seem to have remained rather steady. In this report we will be overviewing some fundamental matters currently in the Gold markets focus, while at the end our technical analysis will provide a clear examination of the price action.

The most important matter currently surrounding not only the Gold market but also the global economy, is the developments on the US Sino negotiation front. At the moment we are observing a blame game between the two largest economies of the world. The US has claimed that China has lacked transparency of information to the world over the Covid-19 outbreak. On the other hand, China in a report by its embassy in the US claimed the U.S. has severely undermined multilateral institutions, including the WHO, and gravely damaged international cooperation on Covid-19. The tensions have escalated since the past weeks also when Presidents Joe Biden and Xi Jinping had a telephone call regarding unfair economic practices and other unresolved issues. We have not observed direct reaction on Gold’s price yet, but in our opinion the tensions have the potential of lifting Gold’s price higher. Back in 2019 when Gold’s price started surging to new yearly high prices, most of the markets attention was upon the trade war between US and China. Thus history is evidence that Gold traders tend to respond if tensions are to increase further.

Furthermore, on Monday a rocket attack was performed on the airport in the Northern Iraqi city of Erbil. Tensions in the Middle East even though ongoing, have not made headlines for some time now making the matter extremely serious. According to reports the attack was aimed at a US military coalition. Then again, the matter had no significant impact on Gold’s price. Yet, military actions especially in the Middle East, could lead to further tensions that could energize Gold traders accordingly.

As per the US economic front, US inflation data released in the previous week did not impress traders significantly while the reaction was felt on Gold’s price. Gold is usually an investment used to counter Inflation. On the day, Gold’s price did move higher while the USD had already been moving lower. Traditionally, investors flock to gold when considering weak inflation but due to the covid-19 circumstances being in motion, Investors reaction may have been mild. Moreover, the largest economies around the world are depending on the ongoing vaccination in order to ease lockdown measures. Easing lockdown measures is the path to further re opening most parts of the economy and restarting the global economic engine. However, Gold traders maybe critical of the current vaccination process that seems to be delaying.

In the following days a rather packed economic calendar seems to be on the markets agenda giving Gold traders new trade openings and opportunities. On the 17th we get the US Retail Sales and Industrial Production for January and the Federal Reserve meeting minutes. While on the 19th we get the Preliminary PMI US Markit Manufacturing and Services figures for February.

تجزیه و تحلیل فنی

XAU/USD 4 hour chart

In the most recent sessions Gold has traded between our (R1) 1835 resistance level and our (S1) 1810 support barrier. In case traders are in favour of a buying momentum, we could see Gold’s price initially engaging the (R1) 1835 resistance level. If the bullish sentiment is prolonged then the (R2) 1855 level could also become a target, while the (R3) 1875 line stands even higher and could be of particular interest for the bulls as it is the highest level reached since the 8th of January. However, as in our opinion Gold continues to be in a sideways motion with bearish tendencies, a possible drop below the (S1) 1810 support barrier could prepare the ground for the (S2) 1785 barrier to be tested. Please not the (S2) 1785 barrier is the lowest level reached by Gold since December 2020, making it a challenge for the bears. Finally the activity of the RSI indicator below our chart has been between the 70 and 30 line for the past weeks implying some ambiguity among traders.

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