Gold Price Forecast: Why downside appears more compelling for XAU/USD?

Gold price turns red for the first time in a week amid firmer DXY.
Treasury yields recover post-FOMC minutes, despite risk-off mood.
Gold eyes more losses amid symmetrical triangle breakdown on the 1H chart.

Dhwani Mehta FXStreet

Gold price closed in the green on Wednesday above $1800 but remained within Tuesday’s trading, as the US dollar’s strength countered the slump in Treasury yields. Heading into the critical June FOMC meeting’s minutes, gold price advanced amid pre-minutes caution and worries over covid contagion, which boosted the safe-haven demand for Treasuries while downing the yields. However, the greenback’s advance amid risk-off mood capped the gains in gold.

Meanwhile, the dollar changed its course on the FOMC minutes and edged lower across the board, although failed to lift the sentiment around gold price. The minutes turned out rather mixed, with the Fed policymakers hinting towards tapering talks in the coming minutes while noting the committee's standard of "substantial further progress" was generally seen as not having yet been met. The not-so hawkish Fed minutes offered some relief to Wall Street indices, keeping a lid on gold’s upside.

In the aftermath of the FOMC minutes, gold is reversing its recent run to three-week tops of $1815, in the red for the first time in a week. The resurgent demand for the US dollar amid risk-averse market conditions, in light of rising coronavirus cases in Asia and the Fed’s tapering expectations, weighs negatively on the USD-denominated gold. Further, a recovery in the US 10-year Treasury yields from five-month lows also collaborates with the downside in the non-yielding gold. Later today, the US Jobless Claims data will be eyed for fresh dollar trades. In the meantime, the dynamics in the yields and the greenback will continue to play out, investors await fresh covid updates and ECB’s decision on its inflation target.

Gold Price Chart - Technical outlook

Gold: Hourly chart

As explained here, gold price failed to deliver a daily closing above the 21-DMA, then at $1804, on Wednesday, which likely recalled the sellers.

On the hourly chart, gold price confirmed a symmetrical triangle breakdown on a sustained breach of the $1800 support.

The bears extend their control, as gold price closes in on the upward-sloping 100-Hourly Moving Average (HMA) at $1794.

If the selling pressure intensifies, a test of the July 6 low at $1790 remains on the cards.

The Relative Strength Index (RSI) is flatlined below 50.00, remaining in favor of the bears.

On the flip side, if gold bulls manage to recapture the key resistance around $1802-$1803 (21, 50 SMAs confluence), then the further upside could open towards the triangle resistance at $1806.

Acceptance above the latter would invalidate the downside breakout of the triangle, calling for a fresh upswing towards $1815.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

GBP/USD holds range below 1.3650 amid Iran risks

GBP/USD extends its sideways consolidative price move for the second straight day and trades below 1.3650 in Tuesday's European session. The US Dollar is looking to build on its modest recovery amid US sanctions on Iran, acting as a headwind for the pair. The lack of follow-through selling warrants some caution for bearish traders.

EUR/USD struggles near 1.1650 as USD recovers amid Mideast woes

EUR/USD is struggling to gain traction, while trading near 1.1650 in European trading on Tuesday. The pair fails to find support amid a modest US Dollar recovery as rising oil prices, elevated bond yields, and escalating Middle East tensions fuel risk-off trades. Germany IFO Survey is next in focus.

Gold remains depressed below $4,650 on firmer USD, Fed risks, and Middle East tensions

Gold remains on the back foot below $4,650 through the first half of the European session. However, the lack of follow-through selling warrants caution before positioning for an extension of the intraday retracement slide from the $4,700 neighborhood, or the highest level since May 14, touched earlier this Tuesday. The US Dollar is seen building on its recovery from a three-month low as inflation risks stemming from volatile energy prices keep bets for at least one interest rate hike by the US Federal Reserve on the table.

Bitcoin tops $80,000 as US Treasury fights high yields – AERO, VIRTUAL rally

Bitcoin extends gains above $80,000 as broader market risk-on sentiment persists. The scarce asset could extend its rally as the US Treasury combats high yields in the long-dated bond market, with further interventions on the horizon. Aerodrome Finance (AERO) and Virtuals Protocol (VIRTUAL) emerged as top performers over the last 24 hours.

The forex market is switching to a ‘debasement trade’

The US dollar has stabilised near three-month lows thanks to a rapid recovery in Treasury bond yields. Yields on 30-year bonds are returning to the levels seen following the Treasury’s announcement that it was increasing the minimum purchase volume to $4 billion. The greenback got support from falling stock indices, the continued rally in Brent crude, and positive signals from the US economy.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.