As the XAU/USD chart shows, last week gold prices fell sharply, interrupting the previous upward trend. This decline was driven by two main factors:
→ End of the US government shutdown. This is believed to have reduced short-term economic risks and lessened demand for gold as a “safe-haven” asset.
→ Hawkish statements from Federal Reserve officials, which lowered market expectations for rate cuts. This pushed up US Treasury yields, traditionally putting downward pressure on non-yielding assets like gold.
This week, the market is awaiting a wave of delayed US economic reports that were postponed during the shutdown, including:
→ Labour market data (Non-Farm Payrolls)
→ Inflation data (CPI)
These releases are expected to give traders greater clarity on the future trajectory of Fed interest rates.
From a technical perspective, the price is currently trading at the intersection of two key lines:
→ Resistance line from the upper boundary of the descending channel originating at the all-time high. Buyers attempted to break through this level last week but were unsuccessful.
→ Support line from the lower boundary of the ascending channel, in place since early autumn.
Given the above, it is reasonable to suggest that:
→ the market is in a balanced position, with traders adopting a wait-and-see approach;
→ a breakout from the symmetrical triangle could indicate the direction of the next significant move in gold prices.
