Gold Price News and Forecast: XAU/USD has been on the back foot in recent trade, with spot prices breaking below last week’s $1720s-$1740s range
|Gold Price Analysis: XAU/USD drops back towards $1700, breaking out of prior range
Spot gold (XAU/USD) prices have been on the back foot in recent trade, with spot prices breaking to the south of last week’s $1720s-$1740s range, though remaining supported to the north of the $1700 level. That means that finally, after seven sessions of being locked within a few dollars of it 21-day moving average, XAU/USD appears to have dropped back away from this level. For reference, the 21-day moving average sits just above $1724. To the downside, gold bears will be eyeing a test of the psychological $1700 level, which happens also to coincide with the 12 March lows. Beyond that, the annual lows sit at just under $1680 and were set back on 8 March.
Driving the day
Not a great deal of new news for financial market participants to get excited about, or at least not anything that will significantly change the outlook for monetary and fiscal policy in the US and the US economy’s growth outlook (naturally, these are key drivers of XAU/USD). But these drivers will be coming later in the week; US President Joe Biden will give more details on his (touted to be) multi-trillion Recovery package. The White House has said that the package is going to be unveiled in two halves with the first to focus most heavily on infrastructure – this ought to support the narrative of a strong US economic recovery in 2021 and likely throughout Biden’s first term as President.
A climbing USDX means Gold investors should care
Positions in the USDX are shifting from shorts to longs, so gold investors should look closely. Why? Because it’s an inverse relationship.
We’ve discussed the negative correlation between the dollar and the precious metals many times before, but it can never be discussed enough, particularly as the situation develops and the outlook for the USD Index becomes more positive.
Once the USD Index lands some knockout punches, the precious metals will be hurting, as they tend to do when the dollar rises. Gold, silver and the miners will eventually rise, but for the medium-term, they are still in bearish territory.
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