The main reason behind the bounce in the gold market is a weaker dollar
Gold prices have been losing ground since March as the rallying dollar and US Treasury yields dented the appeal of the precious metal. At the start of the week, the XAUUSD pair plunged to fresh 2022 lows around $1,786 before bouncing. The bullion has regained both the $1,800 mark and the 200-DMA since then, looking set to finish in green territory for the first time in five weeks.
The question is whether this is the beginning of a major upside correction, or just a dead cat bounce that would be followed by renewed selling pressure. On Friday, gold prices were holding just below the 20-DMA, struggling to regain the $1,850 intermediate resistance on the way towards the $1,900 psychological level that capped bullish attempts earlier this month.
The main reason behind the bounce in the gold market is a weaker dollar, with the US currency retreating across the market these days as traders continue to take profit following the recent rally towards fresh twenty-year highs. In part, this is due to rising recession fears amid weakening economic data and disappointing quarterly results.
At this stage, the overall bullish trend in the buck remains intact, but should the selling pressure intensify in the near term, the yellow metal may see more robust gains, targeting $1,900. Should the bullion overcome this level, one could expect renewed sustained demand for the bullion as signs of a more robust recovery would attract renewed interest from long-term investors amid persistent safe-haven demand in these turbulent times.
Technically, the XAUUSD pair still looks vulnerable, but the outlook improves gradually, with dollar dynamics in focus. Now, gold needs to overcome a slightly ascending 100-week SMA on a daily and weekly closing basis. On the downside, the immediate support arrives at $1,835, followed by $1,810.