XAUUSD bulls advance, but strength is strong with bears

  • The price of gold corrects higher and hits $1,900 in Asia as the US dollar fades.
  • Aggressive moves by Fed policymakers have already prepared investors for a huge rate hike.
  • On Tuesday, US consumer confidence and durable goods orders will remain in focus.

The price of gold is on the rise in Tokyo as the US dollar loses some of its momentum after a strong advance earlier in the week. The price of gold, however, remains close to a four-week low that was printed overnight. At $1,900.21, the price is 0.11% higher. Gold moved from a low of $1,897.42 to a high of $1,903.83.

Gold price pessimism is marked by soaring inflation in the US economy. The U.S. Consumer Price Index (CPI) hit multi-decade highs and the second tight labor market reminder has already driven interest rates up 50 basis points (bps) per month. the Federal Reserve (Fed). Well, as Fed Chairman Jerome Powell dictated in his testimony at the International Monetary Fund (IMF) meeting; a giant rate hike is imminent as investors focus more on the state of the balance sheet reduction. Extracting liquidity from the economy at a faster rate is the need of the hour and Fed policymakers are likely to exploit every measure.

Going forward, the precious metal should dance to the beat of the US Consumer Confidence and Durable Goods Orders release, which is due out on Tuesday. A preliminary reading for monthly durable goods orders is 1% versus the previous print of -2.1%.

Gold technical analysis

From a technical standpoint, the correction is moving on the hourly 38.2% Fibonacci zone near $1,902 and can now be expected to continue lower for the next session. That being said, however, there are prospects for a deeper correction, potentially up to 78.6% Fibo. This has a confluence near the previous troughs:

On a four-hour timescale, XAU/USD is trading near its potential demand zone, which sits in a tight range of $1,891.38-$1,896.31. Adding to the downside screens is a bear cross, represented by the 20 and 200 period exponential moving averages (EMA) at $1,940.00. Meanwhile, the Relative Strength Index (RSI) (14) has settled in the 20.00-40.00 range, signaling the strength of the sellers.

Gold four hour chart