Market Analysis

Gold price trades with minor losses below the $2,400 mark; downside appears limited

Amos Simanungkalit · 22 Apr 202442.4K Views

The gold price (XAU/USD) begins the new week on a negative note and appears to have broken a two-day winning streak, albeit it stays limited in a similar trading range established over the previous week or so.

Hopes for a de-escalation of the Iran-Israel conflict improve investor confidence, which turns out to be a crucial reason driving flows away from the safe-haven precious metal. Aside from that, predictions that the Federal Reserve (Fed) will maintain interest rates higher for longer in response to persistently high inflation in the United States put extra pressure on the non-yielding commodity.

The downside for the gold market appears to be mitigated by predictions that major central banks may lower interest rates this year. Furthermore, worsening global economic conditions should restrict any major depreciation in the XAU/USD. Traders appear hesitant and prefer to remain on the sidelines ahead of this week's release of flash global PMIs on Tuesday and crucial US macro data - the Advance Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index - on Thursday and Friday, respectively.

Technical Analysis: Gold price oscillates within a one-week-old trading range; bullish potential appears intact.

From a technical standpoint, the range-bound price movement seen over the last week or so forms a rectangle on short-term charts. Given the recent explosive rally, this might still be considered a positive consolidation phase. Furthermore, oscillators on the daily chart have eased from overbought area, indicating that the path of least resistance for gold is to the upside. However, bulls may wait for persistent strength and acceptance beyond the $2,400 mark, which represents the upper end of the trading range, before positioning for further gains.

On the other hand, the lower boundary of the aforementioned range, around $2,364-2,363, is likely to protect the immediate downside and serve as a critical pivot point. A convincing breach below may trigger some technical selling, dragging the gold price to the $2,325-2,322 range on its way to the $2,300 round figure.