#Gold Technical Analysis with Economic Outlook:Gold Plummets to Fresh 5-Week Low: 15 FEB 2022

Gold plunged towards a fresh five-week low of 1,831, continuing the strong selling interest of the ten-month peak of 1,960. The RSI is diving towards the oversold territory with strong momentum and the MACD is losing ground beneath its trigger and zero lines. In trend indicators, the 20- and the 50-period simple moving averages (SMAs) are following the descending move in price action.

Further declines may meet support around 1,825, taken from the lows on January 15, while even lower the price may hit the end of December’s trough of 1,797, which could attract traders’ attention.

On the upside, resistance could occur around the 1,843 barrier before testing the 20- and the 50-period SMAs at 1,857 and 1,868 respectively, which stands near the previous peak of 1,870. Higher still, the 200-period SMA at 1,890 would increasingly come into scope, while just above this point lies the psychologically significant level of 1,900, a break of which could shift the bias to a positive one.

The medium-term picture continues to look predominantly bearish, with trading activity taking place below both the 50- and 200-period SMAs.

Economic Outlook

A report indicated that the latest US consumer price index data is higher than economists expected. According to the Bureau of Labor Statistics (BLS), the US annual inflation rate slowed to 6.4% in January, down from 6.5% in December. The economists were expecting a reading of 6.2%. The annual core inflation rate also declined, falling to just 5.6%, down from 5.7%.

On a monthly basis, the Consumer Price Index (CPI) rose 0.5% last month, up from 0.1% the previous month. The core inflation rate rose by 0.4%, unchanged from December. Once again, the inflation rate in the services sector rose to 7.6%. In addition, many categories remain elevated, such as shelter (7.9%), or show signs of rising again, including food and energy.

There are concerns that inflation is flat and could be harder to beat than the Federal Reserve hopes, which could affect interest-rate-sensitive assets. Gold is generally considered sensitive to interest rate movements because it may affect the opportunity cost of holding the bullion that does not yield a return. Meanwhile, the U.S. dollar index (DXY), which measures the U.S. currency against a basket of other major currencies, fell 0.16% to 103.26 on Tuesday. Generally, a weaker price is good for dollar-denominated commodities because it makes them cheaper for foreign investors to buy. For other metals markets, copper futures fell to $4.07 per pound, platinum futures fell to $933.30 per ounce. Palladium futures advanced to $1481.50 an ounce.

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