XAU/USD (gold price in terms of USD) rose to the highest levels since Nov 3 in the last US session at 1129.76, just a whisker short of $ 1130 mark and almost near the 200-DMA at 1130.21 levels. The yellow metal rose $ 14 intraday after the release of weaker global manufacturing surveys across the globe, particularly China, reinforced global growth concerns and hence, boosted the demand for the safe-haven gold. Moreover, the gold continued to benefit from the negative interest rate environment globally, with most central banks’ adopting negative interest rates to stimulate their economy. Further, dwindling bets over four Fed rate hikes this year, following Fed’s vice-chairman Fischer comments, also kept the sentiment around the bullion lifted.
As for today’s trade so far, the precious metal hit fresh three-month tops at 1130.50 in early Asia, and took-out the 200-DMA now placed at 1129.78. From there, the prices retreated sharply from multi-month highs, despite the prevalent risk-off environment as oil prices extended the rout and led the global equities lower. The drop in the prices can be mainly attributed to technically selling after the bullion hit the 200-DMA resistance for the first time since Oct 28 last year. However, the correction looks limited as the broader market sentiment continues to favour the safe-haven bids for gold. While, there is nothing of note in the US calendar today and hence, the main focus will remain on FOMC member George’s speech for fresh insights on Fed’s rate outlook.
Technicals – Correction looks limited to $ 1122-1121.50 – key support
Having achieved the inverted head and shoulders target on hourly sticks at $ 1130, gold extends its retreat below the bearish 5-SMA and now looks to drop further as reflected by the RSI, which breached the mid-lines from above and entered the negative territory. Hence, to the downside, the immediate support is seen at upward sloping 50-SMA at 1121.49, which coincides with the 5-DMA. A breach of the last, the prices could test the horizontal support at 100-SMA (1119.82). In case the prices manage to resist the last, we could see the bullion climbing back towards 200-DMA. The yellow metal is expected to consolidate the 2-day rally ahead of the crucial jobs data from the US.
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