On the downside, failure to hold above the $1,815 mark would pave the way to this month’s lows around $1,805
Gold prices continue to face resistance represented by the 20- and 200-DMAs that converge today at $1,842. After another failed attempt to overcome this barrier, the precious metal came under severe pressure on Thursday to notch one-week lows just above the $1,820 zone today. The XAUUSD turned slightly positive in early European trading hours, still struggling to stage a sustained recovery so far despite some retreat in the dollar.
The USD index retreated marginally on Friday, albeit holding above the 104.00 mark representing the immediate support for the time being. The greenback came under some pressure as risk sentiment improved across the financial markets while US 10-year Treasury yields kept correcting lower to register nearly two-week lows earlier in the day.
The bullion is unlikely advance beyond the mentioned moving averages any time soon, with bearish risks persisting for the time being. On the downside, failure to hold above the $1,815 mark would pave the way to this month’s lows around $1,805. Should the dollar extend the retreat in the near term, the metal could stage a bounce, but any meaningful and sustained recovery looks unlikely at this stage, especially as gold struggles to capitalize on its safe-haven status as of late.
In the long term, however, gold prices could rally if the buck weakens substantially assuming that the Federal Reserve would have to start cutting rates at some point in the future if the US economy enters recession amid the central bank’s aggressive tightening measures aimed at fighting elevated inflation. In this scenario, XAUUSD could regain the $2,000 mark, but for the time being, the path of least resistance remains to the downside.