Gold prices in terms of the US dollar (XAU/USD) witnessed sharp moves on Monday, falling from 1170 levels to as much as 1145 lows, before recovering slightly near 1154 at close. Gold prices remained unresponsive to ongoing China stocks crash led panic on Monday and once again failed to breach the key hurdle at 1170 levels, rebounding lower to familiar ranges. As such, gold failed to benefit from its status as the ultimate safe-haven on Monday as the sell-off in risk assets accelerated, but the upward momentum was curbed by a deteriorating inflation outlook.
As for today’s trade, XAU/USD lacks momentum and trades in the red zone, as the extended sell-off in the Chinese stocks failed to boost the safe-haven appeal of the yellow metal. The major Asian bourses rebounded in early trades, however lost steam and closed in to losses as China stocks kept falling. Moreover, the dollar comeback after the free-fall seen yesterday also kept a check on the prices. Markets remain nervous amid mixed global cues with risk-aversion spread wide across. China fears continue to negatively impact major commodity prices which curb the inflation outlook, weighing on gold usually seen as a hedge against inflation.
Technicals – Capped below trend line resistance at 1170 levels
XAU/USD accelerated losses and trades below 1150 marker as China stocks rout amid broad based US dollar rebound. The prices seems to face stiff resistance at 1170 levels and failed another attempt to surpass on Monday and now remains in the negative territory with technical indicators suggesting further room for declines. The daily RSI hovers around 62 aims southwards supporting the case for further downside moves. The prices have pierced through the upward sloping 5-DMA located at 1150.30 and trades around 1148 levels, with the prices likely to drop further towards the slightly bearish 50-DMA located at 1136.33, below a break of daily lows struck at 1145.83.
However, a failure to breach the 1145 support zone, the pair may rebound higher for a retest of the daily highs at 1156.64, beyond which doors open up for a test of 100-DMA located at 1165.40 levels once again. Overall, the prices may keep the recent range below 1170 levels amid a sign of caution in the investors’ mind fuelled by the ongoing Chinese stock markets crash.
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