Gold price (XAU/USD) is facing some resistance while extending its recovery above $1,828.00 in the Asian session. The downside pressure in the precious metal is strong as the US Dollar Index (DXY) has attempted a recovery after a correction to near 104.10. The risk-on impulse has retreated and the investors are shifting back to the risk-aversion theme. S&P500 futures are displaying moderate losses after a positive Thursday. Global equities are prone to sheer volatility as worldwide sticky inflation could be addressed by more rates announcement.
The yields on US government bonds are still struggling to recover after a severe correction. At the time of writing, the 10-year US Treasury Yields were available at around 3.87%. For further guidance, investors will watch the United States Personal Consumption Expenditure (PCE) Price Index figures. On an annual basis, the economic data is seen higher at 4.3% vs. the former release of 4.4%. The monthly data is expected to escalate by 0.4% against 0.3% released earlier. Price pressures in the US economy have shown resilience after a declining trend led by a recovery in households’ spending and an upbeat labor market.
On Thursday, the US Department of Labor reported a surprise decline in the Initial Jobless Claims (IJC) to 193K from Bloomberg’s estimates of 200K. Meanwhile, Continuing claims that count individuals who have already received unemployment benefits for a week or more, decreased by 37,000 — the biggest drop since December — to 1.65 million in the week ended Feb. 11, as reported by Bloomberg. This solidifies the fact that the labor market is extremely solid, considering the declining jobless claims, multi-decade lowest Unemployment Rate, and solid job creation. This bolsters the fact that the Federal Reserve (Fed) cannot pause hiking rates further.
Turning to the technical analysis, Gold price has formed a Spinning Top candlestick pattern on the daily scale that conveys a reversal due to indecisiveness in the sentiment of market participants after a downside move. The importance of the Spinning Top candlestick formation is meaningful as it has formed near the 38.2% Fibonacci retracement (placed from November 3 low at $1,616.69 to February 2 high at $1.959.71) at $1,829.45. The Gold price has also formed a Double Bottom chart pattern in which the second leg of the bottom has formed with less-confident, showing signs of a bullish reversal.
Taking all these factors into consideration, it appears that Gold price is facing some heat while extending its recovery above $1,828.00 as USD Index has found a cushion. The extremely solid US labor market is strengthening the case of policy tightening continuation by the Fed. Moreover, a confluence of Double Bottom formation and Spinning Top near the 38.25 Fibo gives a green signal to a bullish reversal. However, investors will keep a close eye on the United States Personal Consumption Expenditure (PCE) Price Index figures for further guidance.
