Data coming out of the US point to accelerating inflation, which puts pressure on the Fed to tighten monetary policy as aggressively as possible.
According to analysts of the gold market, the dynamics of its prices will depend on "whether investors' fears about inflation will intensify and whether interest rates will rise faster than expected". And the closer the March meeting of the Fed, the stronger the volatility in the quotes of the dollar and gold will grow. In the meantime, long positions look preferable in the XAU/USD pair.
Gold does not generate investment income, but is a popular defensive asset, especially in the face of rising inflation. And if the Fed fails to contain rising inflation, it will make it more difficult for the Fed to keep the balance between economic growth and the monetary tightening cycle, and this, in turn, could hurt the dollar.
In an alternative scenario, XAU/USD will return to the key long-term and psychologically important support level of 1800.00. The first signal for the implementation of this scenario will be a breakdown of the local support level of 1877.00, and a breakdown of the support levels of 1853.00 and 1845.00 will confirm this scenario.
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