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Gold Bulls Stifled by Resistance as Focus Shifts to US PCE

Gold US PCE

Gold prices retreat as confluence resistance halts momentum; investors await US PCE data for market direction.

Following a robust performance last Friday, gold prices experienced a setback on Monday, facing downward pressure from escalating U.S. Treasury yields. This trend, which typically diminishes the attractiveness of non-interest-bearing assets like gold compared to fixed-income securities, led to a close for XAU/USD at approximately $2,030, slightly below a key resistance level near $2,035.

At the start of the new week, investor sentiment appeared cautious, with many adopting a wait-and-see approach towards the precious metal. This hesitation likely stemmed from anticipation surrounding a significant event on the U.S. economic calendar later in the week: the release of the core Personal Consumption Expenditures (PCE) deflator, a key inflation metric closely monitored by the Federal Reserve.

Gold Bulls Stifled by Resistance as Focus Shifts to US PCE

Forecasts indicate a projected increase of 0.4% month-over-month for January’s core PCE, marking a slight slowdown in the annual figure from 2.9% to 2.8%. However, there are concerns within the trading community about the possibility of an unexpected uptick in the data, mirroring trends observed in earlier Consumer Price Index (CPI) and Producer Price Index (PPI) reports released earlier in the month. Such an outcome could inject volatility into financial markets.

A robust PCE report revealing limited progress in curbing inflationary pressures could shift interest rate expectations towards a more hawkish stance. This could lead to speculation that the Federal Reserve might delay the onset of its easing cycle in response to challenges in achieving price stability. While this scenario could bolster yields and the U.S. dollar, it could pose difficulties for the precious metals complex.

Technical Analysis

Gold prices retreated on Monday after encountering resistance near the $2,035 mark, representing a convergence of a downtrend line and the 50-day simple moving average. Confirmation of this bearish rejection could signal a potential pullback toward the $2,005 level. Further downside movement may draw attention to support levels at $1,990 and $1,995.

Conversely, if buyers regain control of the market and drive prices above $2,035 convincingly, it could fuel bullish momentum, paving the way for a rally toward $2,065. The continued upward movement might bring focus to resistance levels at $2,090 and, subsequently, the all-time high of $2,150.

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