- A combination of factors prompted some fresh selling around gold on Thursday.
- The risk-on mood, stronger US bond yields exerted some pressure on the metal.
- A softer tone around the USD might extend some support and help limit losses.
Gold struggled to capitalize on the previous day's goodish intraday bounce and witnessed some fresh selling during the Asian session on Thursday. The underlying bullish tone in the financial markets was seen as one of the key factors that weighed on the safe-haven XAU/USD. Apart from this, the recent runaway rally in the US Treasury bond yields exerted some additional pressure on the non-yielding yellow metal. That said, a softer tone surrounding the US dollar might extend some support to the dollar-denominated commodity and help limit deeper losses, at least for the time being.
Reflation trade remains the primary theme amid the progress in coronavirus vaccinations and US President Joe Biden's proposed $1.9 trillion stimulus package, which has been fueling hopes for a strong global economic recovery. In the latest development, the US Food and Drug Administration said that Johnson & Johnson's one-dose COVID-19 vaccine appeared safe and effective in clinical trials and could grant emergency use approval by the end of the week. Meanwhile, the pandemic-relief legislation will be put on the House floor for a potential vote on Friday or over the weekend.
Adding to this, Fed Chair Jerome Powell's reassurance that interest rates would stay low for a long time further boosted investors' confidence. During his second day of testimony before the House Financial Services Committee on Wednesday, Powell showed commitment to the current ultra-easy monetary policy and reiterated that the Fed has no plans to cut back on money-printing or raise interest rates in the short term. Powell also calmed fears about inflation and said that he will only start worrying if prices begin to rise in a persistent and troubling way.
Meanwhile, rising inflation expectations, along with the reflation trade continued pushing the US bond yields higher, though did little to provide any meaningful boost to the greenback. This, in turn, might hold bearish traders from placing any aggressive bets. Market participants now look forward to the US economic docket, highlighting the release of the Prelim (second estimate) Q4 GDP print. Apart from this, the US Durable Goods Orders data and speeches by influential FOMC members, will influence the USD and produce some meaningful trading opportunities around the commodity.
Short-term technical outlook
From a technical perspective, the commodity has been oscillating between two converging trend-lines over the past two months or so. This seemed to constitute the formation of a bullish falling wedge pattern on the daily charts. However, technical indicators on the mentioned chart have been drifting lower in the negative territory and are yet to support the constructive set-up. This makes it prudent to wait for a sustained breakthrough the wedge resistance, currently around the $1812-13 region, before positioning for any further appreciating move.
Some follow-through buying beyond the weekly tops, near the $1816 level, will reaffirm the bullish breakout and push the commodity back towards the next relevant resistance near the $1842 horizontal zone. The momentum could further get extended towards the $1852-55 supply zone en-route monthly swing highs, around the $1870 region.
On the flip side, the $1783-80 area now seems to have emerged as immediate strong support. This is followed by multi-month lows, around the $1760 region and wedge support near the $1751 level. Sustained weakness below might now accelerate the downfall towards the $1725-24 congestion zone before the metal eventually drops to the next relevant support just ahead of the $1700 mark.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
GBP/USD holds gains near 1.2300 ahead of BoE policy announcements

GBP/USD is consolidating gains at around 1.2300 ahead of the BoE’s policy announcements. Strong UK CPI data, PM Sunak’s Brexit success and dovish Fed hike add strength to the Cable’s bullish momentum.
EUR/USD consolidates gains below 1.0900

EUR/USD has retreated modestly and gone into a consolidation phase below 1.0900 following the rally witnessed in the Asian session. Ahead of the mid-tier data releases from the US, the US Dollar stages a technical correction and makes it difficult for the pair to stretch higher.
Gold extends Fed-inspired bounce off $1,960 on softer yields

Gold price gathered bullish momentum and climbed above $1,980 early Thursday before retreating modestly. The benchmark 10-year US Treasury bond yield is up 1% on the day following Wednesday's sharp decline, limiting XAU/USD's upside for the time being.
Arbitrum's ARB token goes live, here is what to expect

The Arbitrum ARB governance token airdrop goes live marking the beginning of the Ethereum layer-2 solution’s transition into decentralization. Experts on crypto Twitter have warned airdrop participants of issues that arise in claiming ARB airdrop and shared solutions for the same.
BoE Interest Rate Decision Preview: Preparing ground for a rate hike pause in May Premium

The Bank of England (BoE) is seen keeping up its interest rate increases, although at a slower pace in March, as the world battles financial sector risks. The BoE will announce its interest rate decision at 12:00 GMT on Thursday.