Gold Analysis: XAU/USD - A decisive break above $ 1080, targets $ 1088-1094

XAU/USD (gold prices in terms of the US dollar) halted a 2-day slide and rebounded sharply on Tuesday, finally reaching highs beyond 1080 barrier. The price regained 10-DMA at 1078.49 and extended to the upside as a renewed buying interest for the yellow metal spurred following the news of a Russian fighter jet shot down by Turkey near the Syrian border. The investors fretted over conflicts escalating in the Middle-East on the plane crash news and flocked to the traditional safe-haven in gold. Moreover, the US dollar failed to benefit from the upwardly revised US GDP second estimate (2.1% versus 2.0% expected) and continued its corrective slide, thereby boosting the bullion. A weaker greenback makes gold cheaper for holders in other currencies. At close, the pair failed to sustain above 10-DMA and settled at 1075.41.

In today’s trade so far, the yellow metal is seen clinching yesterday’s gains and hovers above 10-DMA now located at 1077.71. The price remains buoyed on the back of extending USD weakness and risk-off moods amid persisting geo-political risks and global security issues. While the negative performance on the Asian equities also lifted the sentiment around the yellow metal. Looking ahead, we have a flurry of key US economic data on the cards later today, wrapping a holiday-shortened week for the US traders. Hence, thin trading is expected later in the NY session with the US durable goods, Core PCE index and consumer sentiment data closely eyed ahead of next week’s NFP report. Although the upcoming US data may have limited impact on the USD, as the Dec Fed rate hike is already priced-in by markets. However, a horribly weak durable goods orders print could raise doubt over the Fed’s intentions next month and add to further bearish USD moves, benefiting the bullion.

Technicals – Positive price-RSI divergence on daily sticks

On daily charts, the pair trades well above 10-DMA and tries hard to take out yesterday’s high reached at 1081.27, which may open doors for further advances. The pair looks poised for further upside, as clearly seen by the positive price-RSI divergence. The prices are seen making lower tops while the RSI forms higher highs. Moreover, the USD is expected to continue its corrective mode, and remain little affected by the US dataflow to be released later in the day.

Hence, to the topside, a convincing break above $ 1080-81 levels backed by higher volume, could take the prices towards the immediate resistance located at 1088.41, 100-SMA on 4h chart. a break above the last, a renewed rally could be witnessed towards the strong upside barrier place near 1094-1095, the confluence of heavily bearish 20-DMA, fib 23.60% retracement (of Oct 15-Nov 18 fall) and 5-WMA. While to the downside, the prices could retest daily lows at 1074.53 should the US durable goods order outperform or the USD halt its correction. A failure to resist the last, the immediate support at 1070 and from there to 1066.49 (Nov 23 low) could be tested.