- Gold sees a temporary respite as bond markets regain poise.
- US $1.9 trillion stimulus optimism also underpins the metal.
- Technical setup remains in favor of the bears ahead of US ISM.
Gold (XAU/USD) is struggling to extend its recovery above $1750, having hit eight-month lows of $1717 last Friday. The non-yielding gold booked the biggest monthly loss since late 2016 in February after the sell-off in global bonds sparked a rally in the yields. The haven demand for the government bonds fell sharply worldwide on expectations of rising growth and inflation forecasts, courtesy of the pace of the covid vaccines rollout and stimulus.
In Monday’s trading so far, gold stages an impressive bounce, as the bond markets regain semblance after a wild week. The US House of Representatives passed the massive $1.9 trillion stimulus package, which now goes for a vote in the Senate. The stimulus optimism also lifted the sentiment around gold. However, gold’s further recovery hinges on the performance of the Treasury yields and the key US ISM Manufacturing PMI due later in the NA session. If the risk-off mood returns to the market in the day ahead, the safe-haven US dollar could regain its bullish momentum, weighing negatively on gold once again.
Gold Price Chart - Technical outlook
Gold: Hourly chart
Gold’s hourly chart shows that the price is breaking through the falling trendline resistance at $1751, at the time of writing.
An hourly closing above that level is needed to unleashing further recovery gains. The Relative Strength Index (RSI) has pierced through the midline to recapture the 50 level.
However, the bearish crossover formed warrants caution for the XAU bulls. The 100-hourly moving average (HMA) cut the 200-HMA from above, confirming a bearish formation.
Therefore, the multi-month lows of $1717 remain on the sellers’ radars, below which the $1700 psychological level could be tested.
On the flip side, a sustained move above $1750 could expose the bearish 50-HMA resistance at $1765. The next critical hurdle is aligned at $1785, which is the confluence of the 100 and 200 averages.
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