Gold Talking Points:

• Gold prices fall into another tight range of support and resistance below $1,900
• Fed expectations remain the prominent driver of price action
• Psychological resistance holds XAU/USD hostage at $1,900.

Gold futures have recovered a portion of recent losses which drove XAU/USD below $1,900. After climbing to a nine-month high of $1975.2 last week, the release of strong US economic data restricted further gains.

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In response to the robust job data and positive ISM figures, recession fears were overshadowed by prospects of further rate hikes. As the 22% rally from the October lows fizzled out, both technical and fundamental factors contributed to Gold’s decline.

Although gold and silver are safe-haven assets that are often used as a hedge against inflation, the non-yielding commodities are sensitive to rising interest rates.

After the Federal Reserve announced a softer 25 basis-point rate hike at the FOMC meeting earlier this month (1 Feb), gold prices temporarily surged before peaking at $1975.2.

Gold (XAU/USD) Technical Analysis

As a series of doji candles formed on the four-hour chart, gold prices dropped below prior trendline support (from the October low), falling below $1930.

Gold (XAU/USD) four-hour chart

With the release of NFP’s and ISM data supporting lower prices, Friday’s move accelerated losses, forcing XAU/USD toward current support at $1880.

Gold Daily Chart

Chart prepared by Tammy Da Costa using TradingView

On the weekly chart below, a rejection of the upper wick at the current monthly high was accompanied by a sharp pullback and a retest of $1873.2. Simultaneously, the weekly CCI (commodity channel index) eased back from overbought territory suggesting that bulls had run out of steam.

Gold (XAU/USD) Weekly Chart

Chart prepared by Tammy Da Costa using TradingView

— Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707