Gold Price Forecast: XAU/USD could target $1,745 if US T-bond yields extend slide
- XAU/USD is posting strong gains for the second straight day.
- 10-year US Treasury bond yield is down more than 3%.
- USD remains on the back foot as risk flows dominate markets.
The XAU/USD pair gained more than 1% and closed above the key $1,700 level on Wednesday, attracting more buyers on Thursday. As of writing, the pair was up 1.15% on the day at $1,727.
The sharp decline witnessed in the US Treasury bond yields seems to be fueling gold's rally. On Wednesday, the benchmark 10-year US T-bond yield managed to post daily gains but failed to hold above the widely-accepted pivotal level of 1.75%. Following the upbeat macroeconomic data releases from the US, the 10-year T-bond yield extended its slide and was last seen losing 3.33% at 1.686%.
The monthly report published by the Institue for Supply Management's (ISM) showed on Thursday that the business activity in the US manufacturing sector expanded at its strongest pace since 1983 with Manufacturing PMI jumping to 64.7 from 60.8. This reading beat the market expectation of 61.3 as well.
Reflecting the positive shift in risk sentiment, the S&P 500 Index touched a new all-time high of 4,004 after the opening bell and the Nasdaq Composite Index is rising nearly 2% at 13,320. In the meantime, the US Dollar Index, which tracks the greenback's performance against a basket of six major currencies, is losing 0.2%, confirming the lack of USD demand.
There won't be any other macroeconomic data releases from the US in the remainder of the day and XAU/USD could go into a consolidation phase with trading conditions thinning out due to the Easter holiday.
Gold technical outlook
With the ongoing rebound, the near-term outlook for gold seems to have turned neutral with a slight bullish bias. The Relative Strength Index (RSI) indicator on the daily chart climbed toward 50 on Thursday and XAU/USD remains on track to close above the 20-day SMA.
On the upside, the initial resistance is located at $1,745 (upper limit of the latest consolidation channel) ahead of $1,770 (50-day SMA). However, the price is unlikely to reach the latter unless it reclaims $1,745.
Supports, on the other hand, are located at $1,720 (20-day SMA, static level), $1,700 (psychological level) and $1,680 (cycle low, March 30 low).
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
