Gold Bounces From 2-Month Lows, But Gains Limited
Alex Boltyan | Feb 28, 2023 03:33PM ET
Gold prices increased on Tuesday, with the spot price XAU/USD gaining for second consecutive day after the greenback weakened across the board following a series of economic releases in Europe and the United States.
At the time of writing, the XAU/USD pair is trading at $1,829, 0.7% above its opening price, after hitting a two-month low of $1,805 earlier in the session. Meanwhile, the dollar, measured by the DXY index, stands nearly flat at the 104.70 zone.
Earlier in the session, February's consumer inflation annual rate from Spain and France came above the consensus at 6.1% (5% expected) and 7.2% (7% expected), respectively. Following the release, the yield on the two-year German bond spiked to a new five-year high as speculation grew that the Eurozone's tightening cycle would continue for some time. The European Central Bank's (ECB) terminal rate is forecasted at 4%, and speculative interest is pricing in rate increases to continue until early 2024.
Across the pond, U.S. bond yields edged higher and trimmed the previous day's decline, with the 10-year yieldtrading at 3.93%, limiting the gold's gains. The 2- and 5-year yields were also higher, at 4.80% and 4.18%, respectively.
Adding to the greenback's weakness, housing data came in weaker-than-expected, while the Conference Board Consumer Confidence Index dropped for the second month in a row to 102.9, versus an increase to 108.5 expected.
From a technical perspective, the XAU/USD pair holds a short-term negative bias according to indicators on the daily chart. The RSI has turned higher but remains in negative ground, while the MACD prints lower red bars, reflecting dwindling bearish strength.
On the downside, the $1,805 low acts as immediate support, followed by the $1,800 area and the 100-day SMA at $1,790 as the following targets. On the flip side, the 20-day SMA stands as a short-term resistance level at around $1,853, ahead of the $1,870 level and the $1,900 psychological mark, which is being reinforced by the 61.8% Fibonacci retracement of the $2,070-$1,615 drop.
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