Any strength in the bullion must be treated with caution as the downside pressure could intensify at any point
Gold prices stay pressured these days, struggling to attract demand at late-September lows below $1,740 as the US dollar remains the preferred safe-haven as recession risks keep growing. The precious metal gave up more than $300 since the Federal Reserve began raising interest rates in March.
As the US central bank remains committed to its tightening path, the persisting USD demand will likely continue to pressure the bullion. Of note, the USD index rallied to fresh twenty-year highs around 107.80 earlier in the day before retreating marginally in recent trading. A decisive break above the 108.00 mark implies that the precious metal could challenge the $1,730 zone, followed by the $1,700 handle in the short term.
So, any strength in gold must be treated with caution as the downside pressure could intensify at any point against the backdrop of a strong dollar. The non-yielding metal could next target the $1,721 zone that represents the last line of defense ahead of the $1,700 mark last seen nearly one year ago.
On the upside, the nearest barrier arrives at $1,750, followed by $1,770 and the $1,800 figure. The latter is the key for recovery in the short term. However, the path of least resistance remains to the downside for the time being.
In a broader picture, the XAUUSD pair is finishing the fourth bearish week in a row, shedding 3.70% since Monday. As such, the current price weakness looks exaggerated, suggesting the price should recover at some point. The question is if the metal finds a bottom above $1,700 of will have to suffer even deeper losses before attracting demand. In this context, further dynamics in USD will be important.