February has NOT been a good month for the gold bugs.
As you can see, spot gold (XAU/USD) has been in a downtrend all month after hitting resistance at the $1,950 zone in early February.
The pair then traded in an observable downtrend some time in the second week while it respected a descending trend line resistance.
Fast forward to today and the trend line resistance remains intact and XAU/USD is having trouble getting buyers above the consolidation at $1,820.
Spot Gold (XAU/USD) 1-Hour Chart by TradingView
Will XAU/USD extend its downtrend?
The U.S. won’t be printing top-tier economic reports today so XAU/USD’s next direction will likely depend on how many more traders will adjust their Fed interest rate expectations higher.
Recall that recent U.S. data releases and Fed member speeches have convinced markets to adjust their expected Fed interest rate “peak” from 4.8% in early February to about 5.4%.
Higher U.S. interest rates makes the non-yielding gold less attractive as a safe-haven compared to the interest rate-yielding USD.
For now, technical indicators favor more selling with both the 1-hour chart’s 100 and 200 SMAs pointed lower. Stochastic has also just left its “overbought” zone so oscillator watchers have a bit of room to sell.
And then there’s the $1,820 previous support area that lines up with the 38.2% Fibonacci retracement of last week’s downswing. More importantly, it’s currently holding as resistance for XAU/USD.
Unless we see sentiment-changing catalysts, XAU/USD could be headed for its weekly lows near the $1,800 psychological level.
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