Gold steadies below $1240 as DXY turns positive on the day near 97
|- Wall Street suffers heavy losses on Tuesday.
- US Dollar Index recovers to 97 area in the second half of the day.
- Precious metal gains more than $15 since the start of the week.
The XAU/USD pair extended its rally for the second straight day on Tuesday and reached its highest level since late October at $1241.80 but lost its momentum before testing the critical 200-DMA at $1243. As we approach the end of the day, the pair was up 0.7% on the day at $1239.
Led by the strong upsurge witnessed in crude oil prices, commodities gained traction this week. Additionally, a broad-based selling pressure witnessed on the greenback provided an additional lift to the pair earlier in the day.
However, with the greenback starting to outperform its rivals in the second half of the day, the pair struggled to push higher and went into a consolidation phase. Following a drop to the 96.40 area, the US Dollar Index recovered to 97 during the NA trading hours following hawkish comment from New York Fed President Williams, who argued that further gradual rate hikes were appropriate given the underlying economic strength of the U.S.
Meanwhile, major equity indexes in the U.S. fell sharply on Tuesday as investors took the T-bond yield curve inversion as a warning sign for a possible recession and allowed the precious metal to stay resilient against the buck.
Technical levels to consider
With a decisive break above $1243 (200-DMA), the pair could target $1248 (Jul. 12 high) and $1260 (Jul. 10 high). On the downside, supports align at $1230 (daily low), $1226 (Nov. 5 low) and $1220 (50-DMA).
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