In a wider picture, the downside potential is limited as long as the yellow metal stays above the ascending 20-week SMA, today at $1,876
Gold prices struggle to regain the upside momentum after a plunge from more than one-month highs earlier in the week. The XAUUSD pair encountered resistance just below the $2,000 mark that scared off buyers, pushing the prices down to the $1,950 zone. The bullion is now trying to hold above the 20-DMA, today at $1,945, in order to avoid a deeper retreat in the near term.
Interestingly, the precious metal looks subdued despite a solid bearish correction in the US dollar. The USD index keep retreating from March 2020 highs seen around 101.00 to derail the 100.00 psychological support in recent trading as traders continue to take profit amid the overbought conditions. The selling pressure surrounding the greenback is due to a retreat in US Treasury yields in combination with less hawkish signals from the Federal Reserve.
However, gold prices failed to capitalize on USD weakness as the bullion lacks the safe-haven demand at the moment. Sentiment in the global financial markets has improved somewhat, albeit the overall tone remains mixed amid the persistent concerns over geopolitics, inflation, economics, and high energy prices. As long as Russia’s special military operation in Ukraine continues, gold will continue to stay afloat within a broader uptrend.
As the XAUUSD pair retreated from the $2,000 handle, the prices have settled in the negative territory on the weekly timeframes, and it looks like the path of least resistance is to the downside for the time being. Gold prices could struggle for some time before regaining the upside bias, with the nearest significant support arriving at $1,920. In a wider picture, the downside potential is limited as long as the yellow metal stays above the ascending 20-week SMA, today at $1,876.