- Gold price wallows in a five-week trough near $1,900 early Wednesday.
- US Dollar keeps its bullish tone intact while US Treasury bond yields correct.
- Gold price could attempt a rebound but sellers will likely lurk on a Death Cross.
Gold price is trading close to the five-week lows of $1,899 set on Tuesday, as the United States Dollar (USD) bulls take a breather amid a minor correction in the US Treasury bond yields from sixteen-year highs.
Focus on US Treasury bond yields, data and Fedspeak
Amidst a mixed market sentiment and a stabilizing bond market in Asia, the longer-end US Treasury bond yields stage a pullback from a multi-year peak, prompting the US Dollar to enter a phase of consolidation near 10-month highs against its major competitors. The benchmark 10-year US Treasury bond yields are down 4 basis points (bps) from 16-year highs of 4.5660%, at the time of writing. This, in turn, is helping Gold price find a floor early Wednesday.
The US bond market faced headwinds at the start of the week, in anticipation of a hefty pipeline of US treasury auctions this week and fears of a US government shutdown. Reuters reported earlier in the day that a US House of Representatives bill to fund parts of the federal government cleared a procedural hurdle on Tuesday, offering some relief to the bond markets.
Gold price could also find support from record-high premiums in the Chinese physical bullion market. According to Bloomberg, the market for bullion in China has surged this month, at times commanding a record premium over international prices of more than $100 an ounce, compared with an average over the past decade of less than $6.” Meanwhile. China's gold imports via Hong Kong rebounded in August from the previous month, which could render Gold price supportive.
On Tuesday, the US Dollar bulls found additional strength from risk aversion, as investors weighed prospects of elevated borrowing costs and its impact on the global economic growth. Several US Federal Reserve (Fed) policymakers have voiced their support for the ‘higher for longer’ rate view, with Minneapolis Fed President, Neel Kashkari, stating that “US rates probably have to go a little bit higher, be held there for longer, to cool things off.” Meanwhile, the Greenback shrugged off mid-tier mixed US economic data releases.
Attention now turns toward the US Durable Goods Orders data and Fedspeak will be eyed for fresh trading impetus in the Gold price. However, the developments in the US bond markets will likely remain the main driver for Gold price going forward.
Gold price technical analysis: Daily chart
Gold price tested the $1,900 threshold after extending the sell-off into the second day on Tuesday. Gold price had faced rejection again at the critical support-turned-resistance of the 21- and 200-Daily Moving Averages (DMA) intersection, then at $1,926.
The further downside appears more compelling, as the 50 DMA has crossed below the 200 DMA, confirming a Death Cross a day ago.
Additionally, the 14-day Relative Strength Index (RSI) indicator is lurking below the 50 level, justifying the bearish potential in Gold price.
However, a dead cat bounce cannot be ruled out given that the Gold price has fallen hard in the early part of the week.
If Gold sellers find a strong foothold below the $1,900 support, a fresh sell-off toward the August 21 low of $1,885 will be on the cards. The next downside target is seen at the $1,970 static support.
On the upside, a sustained break above the confluence of the critical moving averages – 21, 50 and 200, hanging around $1,927, is needed to challenge the downward-sloping 100 DMA at $1,938.
Further up, the $1,950 psychological level will be a tough nut to crack for Gold optimists.
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