Recessionary concerns and hawkish central bank actions have sparked a bearish breakout in the gold market. With gold prices hitting three-month lows, investors are closely monitoring the macroeconomic landscape and central bank policies for potential shifts in market sentiment. The focus now turns to upcoming US Core Personal Consumption Expenditures (PCE) data, which could provide further clues about the future trajectory of gold prices.

Recovery attempts ahead as Core PCE data and technical indicators shape the future of gold prices.

This week witnessed a significant decline in gold prices, driven by hawkish rhetoric from central banks and a bounce in the US dollar. The European Central Bank (ECB) and Federal Reserve Chair Jerome Powell’s testimonies on Capitol Hill added to the bearish sentiment in the gold market. The $1900 psychological level appeared vulnerable as investors grappled with the possibility of further tightening measures. Additionally, the Bank of England (BoE) and the Swiss National Bank (SNB) surprised the markets with their hawkish stance, reminding investors that major central banks might not be done with their hiking cycles.

Despite the downward pressure on gold prices, the market witnessed a modest bounce on Friday. Lackluster US and Euro Area Purchasing Managers’ Index (PMI) data rekindled recessionary fears, prompting investors to seek safe haven assets. Gold staged a recovery attempt, briefly surpassing the $1930 mark, but struggled to sustain the gains as trading activity slowed down after the European session. The market remains sensitive to any signs of economic slowdown or geopolitical tensions that could reignite safe haven demand and limit the bearish breakout in gold.

Looking ahead, market participants are closely watching upcoming US economic data, which could significantly impact gold prices. The release of Durable Goods Orders and consumer confidence data in the early part of the week will set the tone. However, all eyes will be on the Federal Reserve’s Bank Stress Test results announcement, which could provide insights into the stability of the banking sector. The market will analyze any indications of rising rate hike expectations, as well as ongoing hawkish statements from Fed officials. These factors have the potential to influence the US dollar’s strength and drag gold prices lower. Conversely, heightened recessionary fears could serve as a catalyst for safe haven demand, supporting gold prices.

One of the key events on the horizon is the release of the US Core PCE data, the Federal Reserve’s preferred inflation gauge. The outcome of this data release could potentially reshape rate hike expectations. If the Core PCE data exceeds estimates, it could lead to a repricing of rate hike expectations and pose a challenge for gold bulls. A significant deviation from expectations could trigger a break of the psychological $1900 mark, intensifying the bearish sentiment.

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From a technical perspective, the weekly chart for XAUUSD reveals a fresh three-month low, indicating the recent bearish breakout. However, the price is approaching the 61.8% Fibonacci retracement zone, which adds a level of uncertainty to the market. Additionally, a golden cross pattern is emerging as the 50-day moving average is on the verge of crossing above the 100-day moving average. This pattern suggests a potential recovery in gold prices, although a weekly candle close below the previous higher low at the psychological $1800 level would invalidate the bullish trend.

On the daily timeframe, Friday’s candlestick formation indicates a potential bounce higher, supported by an inverted hammer candlestick pattern. A rebound on Monday could encounter resistance near the 100-day moving average around the $1942 level, while a deeper pullback may find support from the 50-day moving average near $1977. However, if the bearish momentum persists and prices break below the psychological $1900 mark, further support can be expected around $1875, followed by the 200-day moving average at $1850.

Conclusion

In conclusion, the recent bearish breakout in the gold market amid recession fears and central bank actions has sparked caution among investors. The upcoming US Core PCE data will be closely monitored for potential shifts in market sentiment. While technical indicators suggest a possible recovery in gold prices, the outcome of economic data and central bank policies will play a crucial role in determining the future trajectory of gold prices. Traders and investors are advised to stay vigilant and assess the evolving market dynamics before making any investment decisions.

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