Gold prices gain as USD falls

Gold prices gained slightly over the past 24 hours after the worst two-day loss since early February. The anti-fiat yellow metal benefited from a cautiously weaker US dollar as traders continued to fine-tune their expectations of where the Federal Reserve might take interest rates later this year.

During Tuesday’s Wall Street trading session, Atlanta Fed President Raphael Bostic spoke and noted that he favors one rate hike before “going on hold”. He added that a recession is not in his baseline outlook and that the central bank “will do what it takes” to bring down inflation to 2%.

This commentary might have kept the US dollar restrained and thus offered XAU/USD some lift. Focusing on Wednesday’s Asia-Pacific trading session, the economic docket is lacking notable economic event risk. That may keep traders focused on general risk appetite, which is fairly quiet for the time being.

XAU/USD technical analysis

On the daily chart, gold continues to face the downside risk of the aftermath of a Bearish Engulfing. Downside follow-through has been lacking, with prices being supported by the 20-day Simple Moving Average. Positive RSI divergence was present before the Bearish Engulfing formed, hinting that upside momentum was fading.

For the time being, watch the moving average for key support. In the event of a turn higher, the 2022 high at 2070.42 remains a key level to watch.

XAU/USD daily chart

Gold sentiment analysis - bullish

According to IG Client Sentiment (IGCS), about 58% of retail traders are net-long gold. IGCS tends to function as a contrarian indicator. Since most traders are net-long, this hints prices may fall. But, upside exposure has decreased by 5.14% and 5.45% compared to yesterday and last week, respectively.

With that in mind, recent changes in exposure warn that prices may soon reverse higher once more.

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