Gold Price Analysis: XAU/USD drops to fresh eight-month lows, inching closer to $1750 level
|- Gold remained under some selling pressure on the last trading day of the week.
- A broad-based USD strength weighing on the dollar-denominated commodity.
- The risk-off mood did little to impress bulls or lend any support to the XAU/USD.
Gold edged lower through the early European session and dropped to fresh eight-month lows, around the $1756 level in the last hour.
The precious metal added to the previous day's heavy losses and witnessed some follow-through selling for the second consecutive session on Friday. The overnight slump was sponsored by a sudden spike in the US Treasury bond yields, which tends to drive flows away from the non-yielding yellow metal.
The impressive pace of COVID-19 vaccination and the progress in the US President Joe Biden's proposed $1.9 trillion stimulus package has been fueling hopes for a strong global economic recovery. The reflation trade, along with rising inflation expectations continued pushing the US bond yields higher.
In fact, the yield on the benchmark 10-year US government bond rose beyond 1.50%, or more than one year high. This, in turn, provided a strong lift to the US dollar, which gained traction on the last trading day of the week and exerted additional pressure on the dollar-denominated commodity.
Meanwhile, a fresh wave of the global risk-aversion trade – as depicted by a sharp pullback in the equity markets – did little to impress bulls or lend any support to the safe-haven XAU/USD. The lack of any buying interest favours bearish traders supports prospects for further weakness.
Even from a technical perspective, a break below the $1964-60 cluster support adds credence to the bearish outlook. Hence, a subsequent slide towards testing the $1750 support zone, en-route the $1725-24 region and the $1700 round-figure mark, now looks a distinct possibility.
Market participants now look forward to the US economic docket, featuring the releases of Core PCE Price Index, Goods Trade Balance and Chicago PMI. This, along with the US bond yields, will influence the USD. Apart from this, the broader market risk sentiment might further produce some trading opportunities around the XAU/USD.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.