XAU/USD Current price: $1,797.50
- The Bank of Canada announced the end of its pandemic-related facilities.
- US Treasury yields curve is flattening, the first sign of a rate hike cycle.
- XAU/USD maintains a neutral stance near its October monthly high.
Gold is posting modest intraday ahead of Wall Street’s close, bouncing from an intraday low of 1,783.44 and trading below the critical 1,800 threshold. Demand for the greenback eased as yields retreated further. The yield on the 10-year Treasury note currently stands at 1.54%, while that on the 2-year note ticked higher, now at 0.50%. The yield curve is flattening, usually a hint of a rate hike cycle.
The Bank of Canada announced it has decided to end its weekly purchases of government bonds, the first central bank to end pandemic-related facilities, surprising investors who were speculating on a gradual reduction of QE. The US Federal Reserve, the Bank of England and even the European Central Bank, are also in the tapering path, with movements there expected for the next quarter.
The dollar weakened in this scenario, and Wall Street trades in the red, despite earnings reports keep surprising on the upside, as investors anticipate chances of the Federal Reserve announcing a more aggressive tapering. Gold prices are taking mild advantage of this.
Gold price short-term technical outlook
The daily chart for XAU/USD shows that the bright metal is hovering just above the 23.6% retracement of its latest bullish run at 1,790.60. The daily chart shows that the price keeps seesawing around its 100 and 200 SMAs while developing well above a firmly bullish 20 SMA. Meanwhile, technical indicators hold within positive levels with modest bullish slopes, enough to limit the downside.
The 4-hour chart offers a neutral stance for the near term, as gold is meeting intraday sellers around a flat 20 SMA while holding above the longer ones. However, technical indicators remain directionless around their midlines, reflecting the absence of directional strength. A candle close above 1,800.60 should favor another leg north towards the monthly high at 1,813.80.
Support levels: 1,790.60 1,778.60 1,767.50
Resistance levels: 1,800.60 1,813.80 1,823.15
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