- Gold price turns south after Friday’s rebound despite a weaker US dollar.
- Hawkish ECB bets and pre-US inflation data anxiety keep gold bulls at bay.
- XAU/USD needs acceptance above $1,730-$1734 after a bullish channel confirmation.
Gold price is back in the red this Monday at the start of the week after bulls ran into stiff resistance near the $1,730 region on Friday. The bright metal is failing to capitalize on a broad-based US dollar weakness amid a renewed uptick in the Treasury yields and calls for aggressive ECB tightening in the coming months. Citing five sources close to the matter, Reuters reported that “many (ECB) policymakers saw a growing probability that they will need to take the rate into "restrictive territory". Meanwhile, a 75 bps September Fed rate hike is a done deal, with money market pricing an 88% chance. Therefore, hawkish ECB and Fed rate expectations exert downside pressure on the non-interest-bearing bullion.
The precious metal also ignores the mixed market mood, in the face of the renewed US-China trade woes and a covid resurgence in Beijing, as bulls sense caution ahead of Tuesday’s US inflation data. The US annualized Consumer Price Index (CPI) is seen easing sharply to 8.1% in August vs. 8.5% booked in July. The softening price pressure in the US could confirm peak inflation, prompting the Fed to slow down on its pace of tightening. The data could have a major impact on the market pricing of this month’s Fed rate hike, eventually influencing the gold price action.
Also read: Gold Price Forecast: XAU/USD bulls eye a 61.8% golden ratio daily target
XAU/USD snapped a three-week downtrend and ended the week modestly in the green, benefiting from an extended correction in the US dollar from a 20-year peak. Profit-taking and position readjustment ahead of Tuesday’s critical inflation data from the US fuelled the sharp downside in the greenback. Additionally, a swift recovery in the US Treasury yields amid a better mood on Wall Street aided the yellow metal at the dollar's expense.
Gold price technical outlook: Daily chart
Gold price broke above the falling trendline resistance at $1,712 on a daily closing basis and validated a falling channel breakout.
The recovery from six-week lows could regain traction on a sustained move above the $1,720 round number, above which the $1,730-$1,734 supply zone could come into play.
The area is the confluence of the recent range highs and the bearish 21-Daily Moving Average (DMA). Further up, the 50-DMA at $1,742 will be a tough nut to crack for bulls.
With the bear cross still in play and the 14-day Relative Strength Index (RSI) lurking below the midline, bears try their luck again.
On the downside, the channel resistance-turned-support at $1,708 could likely limit the decline. The next cushion is seen at the $1,700 threshold, below which the rising trendline support of $1,695 will be challenged.
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
EUR/USD stays below 1.0800 after upbeat US data
EUR/USD stays under bearish pressure and trades slightly below 1.0800 in the American session on Thursday. The data from the US showed that the real GDP growth for the fourth quarter got revised higher to 3.4% from 3.2%, supporting the USD and weighing on the pair.
GBP/USD stays in daily range above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.
Gold clings to strong daily gains above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.