April 25, 2024

Gold Prices Show Resilience Despite US Economic Data – Technical Analysis Indicates Upside Potential

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In the wake of favorable economic data from the United States, the price of gold experienced a modest retreat, yet the overall market sentiment remains decidedly bullish. Analysts suggest that the precious metal could maintain its upward trajectory if upcoming US and Canadian economic data proves to be weaker than expected.

Notably, US economic data released in the previous session exceeded expectations, contributing to the temporary dip in gold prices. Nevertheless, market sentiment leans toward optimism, with the potential for gold to resume its ascent should forthcoming data disappoint.

In Switzerland, the Consumer Price Index (CPI) for August saw an anticipated increase of 0.2%. Investors are now eagerly awaiting key US data releases, including the Non-Farm Employment Change, Unemployment Rate, Average Hourly Earnings, and ISM Manufacturing Purchasing Managers’ Index (PMI). The outcome of these releases is poised to wield a significant impact on the gold market. Weak data could provide an upward boost to gold prices, while robust figures might exert downward pressure.

Similarly, Canada is set to unveil its Gross Domestic Product (GDP) data today. Should the GDP growth fall short of expectations, it could serve as an additional catalyst for the gold market.

Looking ahead, the prevailing bias in the gold market remains bullish, although the impending US and Canadian data releases hold the potential to sway sentiment. Investors are advised to closely monitor these data points to discern their impact on gold prices.

From a technical perspective, the XAU/USD (gold/US dollar) price displayed a brief retreat after testing and retesting the 61.8% Fibonacci retracement level at 1,948. This retracement, following a robust rally, was viewed as a natural market correction. Significantly, the failure of the price to reach and retest the 50% Fibonacci retracement level at 1,936 suggested the presence of resilient buyers and a compelling upside momentum.

The breakout above the 61.8% Fibonacci retracement level, coupled with the formation of a new higher high, bolsters the argument for continued upside potential, targeting the median line (ML) of the ascending pitchfork, currently standing at 1,958.

Key technical levels to monitor include:

  • 61.8% Fibonacci retracement level at 1,948.
  • 50% Fibonacci retracement level at 1,936.
  • Median line (ML) of the ascending pitchfork at 1,958.

Should the price breach the ML, the next notable resistance level lies at 1,970. However, should the price falter in surpassing the ML, a pullback to the 50% Fibonacci retracement level may be in store.

In summary, the XAU/USD market maintains a bullish bias. Nevertheless, market participants are urged to closely watch price action and remain prepared for potential pullbacks as they navigate the dynamic world of gold trading.

David Thompson
Financial Desk

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