Gold prices in terms of the US dollar (XAU/USD) extended losses and closed on Tuesday at 1146.18, having bounced-off lows near 10-DMA located at 1134 levels. The prices dropped for yet another day after the Chinese central bank (PBOC) slashed benchmark interest rates and the RRR in a bid to spur its economic growth calmed unnerved investors and boosted risk sentiment across the board. The US dollar not only benefitted from the improving risk-appetite amidst investors but also from upbeat US consumer confidence and home sales data, weighing heavily on the bullion.
XAU/USD depreciated for the third day in a row on Wednesday erasing early gains as the Chinese central bank slashed its interest rate, which helped to stabilize global equities, thus reducing gold’s allure as a safe-haven asset. At the moment, the prices seems to have recovered most losses and trades muted around 1138 levels as markets now begin to price-in a softer US durable goods print due to be reported in the NA session, which is expected to negatively impact the US currency. The durable goods orders figures for July expected to dip 0.4% owing in part to weakness in the transportation component (ex-transportation orders are projected to edge 0.2% higher). While FOMC member Dudley’s speech to be delivered later tonight will also be closely watched.
Technicals – Struggling hard to regain footing, capped by 5-DMA
XAU/USD tries to recover losses and extend higher towards the 5-DMA resistance located at 1150.50 levels as the gold bulls are seen gathering pace ahead of the US data; however retuning risk-appetite seems to restrict the upmoves. The prices seem to remain supported above 50-DMA and 10-DMA confluence located at 1135 levels, below which XAU bears may take over dragging the pair lower to 1130 levels. A break below the last, selling pressure is likely to intensify with the upward sloping 20-DMA located at 1115.40 next in sight. This may be the case should the US data surprise markets to the upside boosting the greenback across the board. The daily RSI hovers around 55 and aims lower suggesting further declines likely.
In case the durable goods print comes in line with expectations or worse than expectations, the pair may rebound higher for a retest of the daily highs at 1146.34, beyond which doors open up for a test of 5-DMA located at 1150.50 levels. A breach of the last, the prices could attempt another run towards 100-DMA – critical resistance at 1164.80.
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