Gold staged a minor-comeback on Friday, halting a 3-day decline, and holds well above the horizontal support located near 1318 levels. The bulls seem to gather pace for a next push higher, in response to further drop in the treasury yields and bearish DXY on no new surprises from the Fed Chair Yellen, as widely anticipated
The yellow metal benefits so far this session amid increased cautiousness in the markets ahead of Yellen’s speech at the Jackson Hole Symposium. Yellen is not expected to come out really hawkish, and could tread the tricky path by not committing at this stage to hike in Sept, while still keeping the exact timing of the rate rise data-dependent.
The renewed uncertainty around the Fed rate hike timing this year could trigger fresh sell-off in the DXY, sending gold and yen sharply higher. In recent times, gold and yen are seen trading in a positive correlation.
Technically, gold is trading within a potential ascending triangle formation, with the natural tendency to break higher. Hence, unimpressive Yellen could pour cold water on rate hike expectations for this year and trigger massive rally in gold towards $ 1360 levels. While the DXY could drop further to test two-month lows reached just ahead of 94 handle.
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