Gold Remains Sideways, Fails to Hold Above $2,000

Gold prices reached levels above $2,000 on Monday but then quickly pulled back to $1,980, remaining in a consolidation phase.

At the time of writing, the spot price XAU/USD is trading at $1,987, up 0.28% on the day, after hitting levels under $1,980 during the European session.

The improvement in market sentiment after the deal between regulators and JPMorgan (NYSE:JPM) that ended the drama with First Republic Bank (NYSE:FRC) weighed on the dollar but only briefly. After falling on Monday, it is now posting mixed results, gaining versus the euro and the pound, but falling sharply against the kiwi and the aussie.

The Reserve Bank of Australia unexpectedly raised interest rates on Tuesday, and the Federal Reserve and European Central Bank will announce their decisions on Wednesday and Thursday, respectively. More rate hikes are expected, which could lift yields if their messages are seen as hawkish, potentially pushing gold prices lower.
The Fed is expected to raise rates for the last time. On the contrary, a soft tone could trigger a rally in bonds.

The RBA's decision shows that there is still room for hawkish surprises as inflation remains elevated in many countries. The latest data from the US shows a slowdown, but at a slow pace. The FOMC decision and economic data (ADP private employment on Wednesday and NFP on Friday) could trigger volatility, challenging the current directionless markets.

From a technical perspective, XAU/USD remains below the 20-day Simple Moving Average and unable to consolidate above $2,000. If it rises and confirms above, it will change the short-term bias back to bullish. On the contrary, a slide under $1,980 should expose the critical support at $1,970.

With the price below the 20-day SMA and technical indicators showing bearish signals, risks are tilted to the downside in the near term, suggesting an extension of the retreat from $2,050. Below $1,970, the next strong support is in the $1,950 area.