Gold Price Forecast: XAU/USD bounces off a dip to $1760 amid falling Treasury yields
|- Gold extends post-Fed pullback from short-term key resistance.
- Evergrande headlines underpin US dollar strength after Fed tapering.
- 200-SMA, three-week-old trend line challenge bull’s entry, PMIs eyed.
- Gold Price Forecast: Bulls maintain the pressure
Update: Gold price is making a minor recovery attempt from two-day lows of $1760.86, helped by a retreat in the US Treasury yields amid easing risk-on trades. China Evergrande debt concerns resurface amid an impending offshore coupon repayment this Thursday, as investors reassess the risks of a market contagion once again. The worsening market mood has lifted the demand for the US Treasuries and gold, weighing negatively on the yields alongside the dollar. Despite the bounce in gold price, the Fed’s hawkish turn on Wednesday continues to threaten the bulls. Fed Chair Jerome Powell but announced that the tapering could start ‘soon’ and end around mid-2022, signaling that the rate hike could be sooner than expected.
In the day ahead, the Evergrande updates will continue to influence the risk trends, in turn, impacting the demand for the greenback and gold price. On the data front, the Euro area and the US Preliminary Manufacturing and Services PMIs will be also closely eyed for a fresh take on the global economic recovery.
Read: Fed Rate Policy Decision: The taper is coming, “soon”
Gold (XAU/USD) remains on the back foot for the second consecutive day, down 0.28% intraday around $1,763 during early Thursday. In doing so, the yellow metal keeps the Fed-led losses while headlines from China add strength to the US dollar strength, which in turn is inversely related to the gold prices.
Having refreshed the multi-day top with an uptick, the US Dollar Index (DXY) remains firmer around a five-week high of 93.50 as news concerning China’s Evergrande arrives as mixed.
The struggling real-estate firm’s Chairman tries to placate bears with comments like, “The firm will try its best to resume work and production.” However, headlines suggesting further losses for the Evergrande shareholder, with signals of selling further stake by ArticleBody Chinese Estates, a Hong Kong property company keep traders on their toes.
It’s worth noting that the China Communist Party’s (CCP) deal with the struggling real-estate player Evergrande and the People’s Bank of China’s (PBOC) heavy liquidity injection adds to the risk-on mood the previous day.
Above all, the Fed’s tapering and rate hike signals are crucial for the DXY strength.
The US Federal Reserve (Fed) matched market expectations of keeping the benchmark rate unchanged at 0.25% but the policymakers were divided over the hike, now expecting a lift from either 2022 or 2023 versus the previous support for 2023. It’s worth noting that the US central bank cut the 2021 growth forecast and remained unclear on when the rate will start rising after the tapering concludes.
On the contrary, Fed Chairman Jerome Powell not only hints at the positive conditions matching for the consolidation of the asset purchase but also signaled the start of taper as soon as the next meeting, even if on good employment data not needing too strong figures.
Amid these plays, stock futures remain mildly bid but the US 10-year Treasury yields stay pressured at the latest.
Looking forward, Evergrande headlines may entertain gold traders, as well as the preliminary readings of September PMIs. Should China fails to tame Evergrande default and the US activity numbers come in stronger, as expected, gold will have a further downside to track.
Technical analysis
Gold justifies U-turn from a convergence of 200-SMA and a three-week-old resistance line as MACD teases bears.
The precious metal currently battles 50% Fibonacci retracement (Fibo.) of recovery from the yearly low marked in August, near $1,761.
Also acting as important downside support is the latest swing low, as well as the 61.8% Fibo. level around $1,743.
It’s worth mentioning that August 10 levels surrounding $1,738 and $1,717 will precede the $1,700 threshold to challenge gold bears below $1,743.
Meanwhile, corrective pullback needs to cross the 38.2% Fibonacci retracement level of $1,778 to aim for the stated resistance confluence near $1,788.
Following that, the mid-month peak close to $1,808 and multiple hurdles around $1,818 may entertain gold buyers before directing them to the monthly peak near $1,834, also the double top.
Gold: Four-hour chart
Trend: Further weakness expected
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