- Gold price turns positive on Tuesday, the first time in five trading days.
- China's covid woes hurt risk sentiment, weighing on the US Treasury bond yields.
- The US Dollar pauses, digesting the latest US Federal Reserve commentary.
- Gold price awaits a bull flag breakout amid a lack of top-tier United States data.
Gold price is trading in the green zone in early Tuesday’s trading, snapping a four-day downtrend. A potential bull flag on the daily chart and a pause in the United States Dollar (USD) recovery have allowed Gold price to stage a comeback toward the $1,750 barrier.
China’s covid woes keep risk trades and US Dollar jittery
China is once again grappling with surging covid cases, which has prompted the country’s officials to announce fresh restrictions and lockdowns in major cities, rattling markets amid resurfacing global growth fears. “The southern Chinese metropolis of Guangzhou locked down its largest district on Monday testing China's attempt to bring a more targeted approach to its zero-COVID policies which calls for cities to be more targeted in their clampdown measures. Guangzhou reported 8,210 new local COVID-19 cases,” FXStreet’s Analyst Ross J. Burland noted.
The US Dollar fails to capitalize on investors’ nervousness, as the renewed weakness in the US Treasury bond yields weighs negatively for the American Dollar while boding well for Gold price. The US Treasury yields are feeling the heat of the dovish commentary from the United States Federal Reserve policymakers. San Francisco Fed President Mary Daly said on Monday the real-world impact of the Federal Reserve’s interest rate hikes is likely greater than what its short-term rate target implies. Cleveland Fed president Loretta Mester said the Federal Reserve can go for smaller rate increases from the next month as it recalibrates its policy to help bring down high inflation.
Federal Reserve minutes next of relevance for US Dollar, Gold price
Amidst the recent mixed commentary from the Federal Reserve officials, the US Dollar and Gold price eagerly await Wednesday’s US Federal Reserve November meeting minutes for fresh signals on the central bank’s rate hike track. The United States Federal Reserve’s Statement of Economic Projections (SEP) will hog the limelight, with the Dot Plot chart in focus for cues on the terminal rate.
Most traders are betting on a 50 bps hike in December. Chances of a 75-bps hike are seen at 19% following recent comments by Federal Reserve officials, according to the CME FedWatch Tool.
Gold price technical outlook: Daily chart
The short-term technical outlook for Gold price remains bullish, as buyers await a bull flag confirmation on the daily chart.
Gold price eyes a daily close above the falling trendline resistance, now at $1,750, to trigger the bullish continuation pattern.
The 14-day Relative Strength Index (RSI) is inching higher, sitting comfortably above the midline, backing the case for a potential uptrend.
Acceptance above the $1,750 level will seek a test of the $1,760 round number, with eyes on the multi-month highs at $1,787.
On the flip side, strong support is seen at the falling trendline support at $1,725. A daily closing below the latter will invalidate the bullish thesis, opening floors toward the mildly bearish 100-Daily Moving Average (DMA) at $1,712
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