Gold recovers above $2,300: What’s next?

  • Weak US PMI data led gold to erase losses, hinting at potential interest rate adjustments favoring gold.
  • XAU/USD struggles at the 23.6% Fibonacci level, indicating a possible continuation of the downtrend. Insights from Ole Hansen suggest this correction will reveal gold’s true demand.

Gold managed to recover its losses yesterday (biggest daily slump in almost 2 years) on weak US PMI data. The thought here is that sluggish growth indicators might push the Federal Reserve towards an earlier interest rate cut (although don’t hold your breath), potentially increasing the attractiveness of non-yielding assets like gold.  

The rate of expansion in US business activity slowed amid signs of weaker demand, according to the latest S&P Global Flash PMI report.  

From a technical standpoint, XAU/USD is currently grappling with the 23.6% Fibonacci retracement level from the rally between $1,984 and $2,430, struggling to surpass it convincingly.  

Ole Hansen from Saxo Bank notes that gold’s vigorous surge since mid-February is undergoing a necessary correction, which should hopefully provide insights into the actual underlying demand (now that geopolitical risk has somewhat cooled).  

Market attention now shifts to three key US data releases: US durable goods (Wednesday), US Q1 Flash GDP (Thursday), and US Core PCE on Friday. While all three could impact the market, the latter two are anticipated to carry greater significance.  

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