- Gold bulls are gathering pace for the next push higher.
- US 10-year real or inflation-adjusted yield hits record low of -1%.
- Technical set up points to the upside in the near-term.
Gold (XAU/USD) witnessed a bumpy ride starting out a fresh week on Monday, settling almost unchanged about $10 below the new record highs of $1988.02. The greenback staged a recovery amid profit-taking and upbeat US ISM Manufacturing data and knocked-off the bright metal as low as $1960. The US manufacturing activity accelerated to its highest level in nearly 1-1/2 years in July. However, the metal regained poise and jumped back towards $1980 on the back of the late-selling in the US dollar. The dollar recovery faltered, in the face of the rising coronavirus cases across the US states and slow progress towards a US fiscal spending package.
So far this Tuesday, the yellow metal consolidates the overnight advance, with the upside attempts seen capped by the upbeat market mood. Vaccine hopes and renewed weakness in the US dollar drive investors towards the riskier assets. Although, the non-yield gold continues to draw support from the negative US 10-year real yields, which wallow near record lows of -1%. The falling real rates are indicative of dour macro outlook, thus, underpinning the safe-haven bids for gold. Fresh US-China concerns over the Hong Kong and Tik-Tok issue could likely benefit the precious metal going forward. Next of relevance for traders remains the US Factory Orders data and ongoing US stimulus negotiations.
Short-term technical outlook
Gold: Hourly chart
As observed in the hourly chart, the price is teasing a descending triangle breakout near $1976 levels, with the Relative Strength Index (RSI) still holding up above the midline in the bullish territory.
A technical breakout on an hourly closing basis above the $1978 level could open doors for a retest of the record highs en route the $2000 barrier.
The immediate downside sees powerful support at $1973/72, the confluence of the 21 and 50-hourly Simple Moving Averages (HMA).
The next support awaits at $1966, the horizontal 100-HMA, which will test the bears’ commitment.
A break below the horizontal trendline support at $1960 will negate the near-term bullish bias, opening floors for further correction.
All in all, the path of least resistance appears to the upside in the day ahead.
Gold: Additional levels to consider
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