Gold Price Forecast: XAU/USD bulls insist but Treasury yields surge could play a spoil sport

Gold struggling to extend the recovery from multi-month lows.
US Treasury yields surge lifting the US dollar.
Attention turns to the Fed Chair Powell’s testimonies.

Dhwani Mehta FXStreet

The reflation trade emerges as the key theme starting out a new week this Monday, limiting the recovery in Gold (XAU/USD) from seven-month lows of $1761. Expectations that US President Joe Biden’s $1.9 trillion stimulus package could be approved next week, refueled the market optimism and reflation trade, which drove the US Treasury yields sharply higher. The benchmark 10-year US Treasury yields reached one-year highs, capping the advance in the non-yielding gold.

The rally in the US rates put a fresh bid under the dollar across its main peers, keeping the additional upside elusive in the metal, for now. Positive developments on the covid vaccine front could also likely weigh on gold. Markets now look forward to the testimonies by the Fed Chair Jerome Powell due on Tuesday and Wednesday for fresh trading impetus.

The risks of ongoing business failures in the US "remain considerable" even as the economy emerges from the coronavirus pandemic, the Fed said on Friday in its semi-annual monetary policy report to Congress.

Gold Price Chart - Technical outlook

Gold: Hourly chart

Gold’s hourly chart shows that the price gyrates between the bearish 100-hourly moving average (HMA) and upward-sloping 21-HMA, awaiting fresh catalysts for a range breakout.

A break above the 100-HMA at $1788 could prompt the XAU bulls to challenge the key horizontal trendline barrier at $1793 levels. Acceptance above the latter is needed to stimulate the recovery mode.

The Relative Strength Index (RSI) edges higher above the 50 level, suggesting the metal could see a fresh leg higher in the sessions ahead.

Meanwhile, a breach of the critical support around $1780 could trigger a sharp fall towards the multi-month lows of $1761.

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.

AUD/USD turns south toward 0.6900 as USD firms up

AUD/USD sees fresh selling and drops toward 0.6900 in late Asian trading on Monday, as renewed US Dollar strength weighs on the pair amid lingering Middle East and Russia-Ukraine geopolitical tensions. Focus remains on Oil prices, Treasury bond yields, and RBA expectations for fresh trading impetus in the major.

USD/JPY retakes 158.00 amid hawkish BoJ bets, firmer USD

USD/JPY erases losses and retakes 158.00 in the Asian session on Monday, trading within a one-week-old range. Geopolitical uncertainty continues to underpin the US Dollar, despite fading Fed rate hike hopes, supporting the pair's rebound. However, further upside could be capped by hawkish BoJ expectations and looming intervention risks that could support the Japanese Yen.

Gold trades flat as stronger US Dollar offsets easing Fed rate-hike bets

Gold trades little changed on Monday after giving back most of its early gains. The metal remains caught between easing Fed interest-rate hike bets and a stronger US Dollar (USD), while US Treasury yields also remain elevated near multi-year highs.

Crypto Today: Bitcoin rally slows while Ethereum and XRP extend recovery amid slowing ETF inflows

Bitcoin is narrowly consolidating while trading above $86,000 at the time of writing on Monday. Altcoins, on the other hand, show a positive outlook, with Ethereum edging higher above $2,700 while Ripple steadies above $1.52.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.