Gold Price Outlook As Market Consolidates

Summary:
• Gold was recently rejected at $2200. Could the lack of macroeconomic data provide a pathway through consolidation before taking another stab?

Gold priceS rose marginally in early European trading session on Wednesday, following a 1.10% decline on Tuesday. The commodity traded at $2159 per ounce on the spot market and at $2165 at the futures market as of 10.30 UTC, as traders looked to build momentum on a day of low-key macroeconomic data. The US dollar is currently supported by inflation data, but that support is likely to wane as the day progresses.

The dollar is generally under downward pressure in the middle term, from an anticipated Fed interest rate cut, expected to come in June. In addition, gold has recently expanded its market base, supported by safe haven buying by central banks and retail investors. Also, the commodity faces little competition from US Treasuries, which have fallen significantly in March.

The sentiment around the gold market could, however, work against it in the near term, as investors will likely hold off buying on account of potential consolidation after the recent bullrun. That said, the commodity could get some geopolitical tailwinds from the US and the Middle East.

Donald Trump’s nomination as the Republican presidential candidate sets up a possibility of a return to US-China tarrif wars if he becomes presidents. This could disrupt the already fragile China economy, and possibly bring safe haven inflows into the gold market.

However, China’s stock markets have recently made some recoveries, as investors give a vote of confidence in President Xi Jinping’s stimulus measures. Gold traders will likely reduce their risk appetite as they wait for US jobs data and retail sales figures scheduled for release on Thursday. In the intervening period, developments in the Middle East could bring fresh impetus into the market, as traders watch the progress of Israel-Hamas ceasefire talks amidst the Ramadhan month.

Technical analysis

Gold price has its pivot at 2166, and will remain under pressure as long as resistance remains at that level. The seller-driven momentum will break the 2150 support as long as price action remains under the pivot price. The downside momentum could move the next target to the 2143 support in extension. However, if the buyers push the price beyond the pivot mark. That could build momentum to breach the resistance, at  2173, thus invalidating the bearish narrative and targeting further upside to 2181.