The prospect of higher interest rates is still driving the US Dollar and Bond buying and has dampened the price of Gold. XAUUSD extended its decline last week for the third week in a row with a total weekly decline of -1.68%. XAUUSD hit a low of $1784.39 in trading on Friday, before closing at $1807.29. Gold is retreating and had its worst quarter in five on the strength of the Dollar and hawkish rhetoric from the central bank.
The increase in import duties in India played a role in the fall in the price of Gold. India, the world’s second-largest consumer of gold bullion, raised the basic import duty on gold to 12.5% from 7.5% in a bid to reduce the trade deficit that is weighing on demand.
Gold’s declining appeal has pushed the US Dollar index to near two-decade highs, posting its best quarter in more than five years, making Gold in dollar terms more expensive for overseas buyers.
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Technical Analysis
XAUUSD,H4 – The brief rebound on Friday after breaking $1800 still looks weak. Strong bears are adding to the bearish short-term outlook as prices continue to trend lower. The trades are zigzagging to the downside, checked only by 1 intraday short-term rally. A break of the $1800 level after several recent failures will add bearish signals from negative intraday technical studies and pave the way for further weakness.
However, in the short term, the psychological number of $1800 will be the general basis. A stronger downside move is forecast for FE61.8% at $1748 from $1998-$1786 and $1879 pullbacks. On the upside, the rally will be blocked by the 200-day EMA, before it can head for the $1879 resistance.
Overall, the bearish outlook remains strong, although it appears to be tempered by reports of rising inflation. If it turns out that the market is worried about growth slowing due to aggressive rate hikes, gold will likely still be an option going forward. However, the structural support of $1676 will be the reference point for the immediate gold price, either it will remain consolidated in the price range of $1676-$2069 or eventually this structural level will be penetrated to enter the correction era.
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Ady Phangestu
Market Analyst – HF Educational Office – Indonesia
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