Monday, January 30, 2023

Gold Prices at Risk, Eyeing the Fed’s Key Inflation Gauge. Will XAU/USD Clear Support?


Gold, XAU/USD, Treasury Yields, Core PCE, Technical Analysis – Talking Points:

  • Gold prices ranged as USD fell, 10-year Treasury yield rose
  • XAU/USD may weaken on Fed’s preferred inflation gauge
  • Prices remain within the confines of an Ascending Channel

Gold prices traded relatively flat over the past 24 hours as the yellow metal faced mixed signals from key corners of the market. The anti-fiat yellow tends to be sensitive to the direction of the US Dollar and Treasury yields. These were heavily influenced by US third-quarter GDP data during Thursday’s Wall Street trading session.

The world’s largest economy saw growth increase only 2.0% q/q in Q3, lower than the 2.6% estimate and far slower than the 6.7% outcome in Q2. This sent front-end government bond yields lower, a sign of softer hawkish Federal Reserve expectations. That likely dented the US Dollar, but gold struggled to capitalize on this momentum.

Look no further than the 10-year yield, which still rallied on Thursday. Elevated longer-term rates reflect central bank policy tightening down the road. This will likely be a headwind for XAU/USD in the medium term. Over the remaining 24 hours, gold will be eying core PCE data. The Fed’s preferred gauge of inflation is expected to cross the wires at 3.7% y/y in September. A higher outcome could revive front-end rates and the US Dollar, posing a risk to the precious metal.

Check out the DailyFX Economic Calendar for more key events!

Gold Technical Analysis

Gold continues to trade within the confines of an Ascending Channel in the 4-hour chart below. Lately, XAU/USD has been consolidating since the end of last week as prices struggled clearing the 1800 – 1808 inflection zone. A breakout under the channel exposes the 100-period SMA, which could pivot prices back higher. Clearing the inflection zone exposes the September high at 1834.

XAU/USD 4-Hour Chart

Gold Prices at Risk, Eyeing the Fed’s Key Inflation Gauge. Will XAU/USD Clear Support?

Chart Created Using TradingView

Gold Sentiment Analysis – Bullish

According to IG Client Sentiment (IGCS), roughly 76% of retail traders are net-long gold. Upside exposure has declined by 3.04% and 4.02% over a daily and weekly basis respectively. We typically take a contrarian view to crowd sentiment. Since most traders are net-long, prices may continue falling. However, recent shifts in positioning are offering a bullish-contrarian trading bias.

Gold Prices at Risk, Eyeing the Fed’s Key Inflation Gauge. Will XAU/USD Clear Support?

*IGCS chart used from October 29th report

— Written by Daniel Dubrovsky, Strategist for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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