- Gold struggled to preserve its modest intraday gains to a one-week high touched on Wednesday.
- Rallying US bond yields acted as a headwind for the precious metal, weaker USD extended some support.
- Investors seemed reluctant to place aggressive bets ahead of the key US consumer inflation data.
Gold prices inched higher on Wednesday and touched a one-week high, albeit struggled to capitalize on the move and faced rejection near the very important 200-day SMA. Investors abandoned concerns about the economic fallout from Omicron after preliminary reports indicated that infections caused by the new variant were milder than previously thought. Adding to this, Pfizer said that the third dose of their COVID-19 vaccine neutralized the Omicron variant in lab tests and further boosted investors' confidence. This, along with a sharp intraday spike in the US Treasury bond yields, kept a lid on any further gains for the non-yielding yellow metal.
The downside, however, remained cushioned amid escalating geopolitical tensions, which tends to benefit the safe-haven metal. The US recently announced that it will not send an official delegation to the 2022 Winter Olympics in Beijing. The move is a means of protesting China's alleged violations of human rights and actions against Muslims in Uyghur. Similarly, relations between the US and Russia took a turn for the worse after US President Joe Biden threatened to impose strong economic and other measures on Russia if it invades Ukraine. Apart from this, some US dollar long-unwinding trade further acted as a tailwind for the dollar-denominated commodity.
Investors also seemed reluctant to place aggressive bets, rather preferred to wait on the sidelines ahead of Friday's release of the US consumer inflation figures. The markets seem convinced that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation. Hence, the US CPI report would influence the Fed's decision to taper its stimulus at a faster pace and set the stage for an eventual interest rate hike in 2022. This, in turn, will play a key role in driving the USD demand in the near term and help determine the next leg of a directional move for the XAU/USD.
In the meantime, gold is more likely to continue with its range-bound price action witnessed over the past two weeks or so. Later during the early North American session, traders will take cues from the release of the US Weekly Initial Jobless Claims data. Apart from this, the US bond yields, the broader market risk sentiment and the USD price dynamics will also be looked upon for some short-term trading opportunities.
From a technical perspective, repeated failures near a technically significant moving average (200-DMA) suggest that the corrective slide from a multi-month high might still be far from over. Hence, the recent price action might be categorized as a bearish consolidation phase, marking a brief pause before the next leg down. That said, traders might still wait for some follow-through selling below the $1,762 area before positioning for any further depreciating move. On the way down, the $1,778-77 region might act as intermediate support ahead of the $1,772-70 zone.
On the flip side, bulls are likely to wait for a sustained strength beyond the 200-DMA, which coincides with 100-day SMA, before placing fresh bets. A convincing breakthrough the mentioned confluence hurdle should push spot prices beyond the $1,800 mark, towards the next relevant resistance near the $1,810-15 supply zone. The momentum could further get extended towards the $1,832-34 strong horizontal barrier, which should act as a key pivotal point for short-term traders.
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