In Wednesday’s trading, gold is struggling to extend its previous rebound while defending the $2,000 level. The US Dollar (USD) is licking its wounds in the midst of a cautious risk tone, as investors await new catalysts for a clear directional bias. The lack of high-impact economic data from the United States. As well as uncertainty about the US Federal Reserve’s (Fed) policy outlook, weighed on the US Dollar on Wednesday. The US dollar snapped a two-day recovery rally and fell alongside US Treasury bond yields, reviving the gold price.
Mixed US earnings and uncertainty about the Federal Reserve’s outlook keep XAUUSD traders in the dark.
The market moved better in the first half of the day, weighing on the safe-haven US Dollar after China’s GDP beat showed that the economy is improving in the first quarter. The country’s GDP increased by 4.5% year on year in the first three months of the year, exceeding expectations for a 4% increase.
Later in the day, mixed US corporate earnings and conflicting messages from Federal Reserve policymakers exacerbated the US Dollar’s decline. Allowing the USD-denominated gold price to reclaim the $2,000 level on a daily closing basis.
Shares of Goldman Sachs Group Inc. fell on revenue that fell short of expectations. While Bank of America Corp. rose on profit that exceeded expectations. Netflix Inc. lost ground after the market closed because its subscriber growth and revenue forecast fell short of expectations.
Meanwhile, Atlanta Fed President Raphael Bostic backed the case for a single rate hike followed by a period of holding rates above 5%. It will take some time to bring inflation under control. St. Louis Fed President James Bullard has stated that he prefers rates in the 5.5% to 5.75% range. Markets now estimate that the Federal Reserve will raise interest rates by 25 basis points (bps) early next month. With rate cuts possible as early as July.
The European Central Bank (ECB) and the Bank of England (BoE). On the other hand, are expected to maintain their rate hike trajectory in the coming meetings. As their struggle to contain elevated inflation levels continues unabated. As a result, the disparity in Fed vs. ECB and BoE policy outlooks is also negative for the US Dollar, allowing gold to limit its downside.
There is nothing noteworthy in the near future. in terms of the release of US economic data on Wednesday. As a result, Fed policymakers’ speeches and US earnings reports will drive sentiment around the US Dollar, influencing gold price action.
Gold Technical Outlook
As seen on the daily chart, the gold price continues to struggle with the rising wedge support. Which is now at $2,004.
Gold sellers are looking for a daily candlestick close below the latter to confirm a break down from the month-long rising wedge pattern.
A bearish wedge confirmation could put the moderately bullish 21-Daily Moving Average (DMA) at $1,991 under pressure.
A sustained move below the latter will open the door to further declines towards $1,950, the intersection of the key psychological level and the April 3 low.
However, with the 14-day Relative Strength Index (RSI) still above the midline, Gold bears will face an uphill battle to maintain control.
If the 21 DMA continues to protect the downside, gold could return to its previous highs.
