- Gold remains pressured, as the dollar remains favored.
- US-China escalation could save the day for XAU bulls.
- Technical set up remains in favor of the bears.
Gold (XAU/USD) remained under pressure amid US holiday-led light trading and settled Monday around $1929, having formed lower highs for the fourth straight session. Gold held onto its recent trading range, with the downside bias intact amid a broadly firmer US dollar. The uptick in the European stocks added to the weight on the safe-haven gold. Investors shrugged-off last week’s correction in the US stocks and ongoing US-China tensions. The Sino-American tech war escalated on Monday following a report that the US is considering imposing export controls on China’s state-owned Semiconductor Manufacturing International Corporation (SMIC).
On early Tuesday, the greenback trades on the front foot amid a bearish view on the euro, in light of dovish ECB expectations. Meanwhile, the sell-off in the pound due to growing no-deal Brexit fears also helps keep the buoyant tone intact around the dollar. Therefore, gold is likely to remain less preferred, as the US traders return after a long weekend. However, any escalation on the US-China front could offer temporary respite to the XAU bulls. According to the latest NY Times report, the US is considering a ban on cotton from China’s Xinjiang province.
Gold: Hourly chart
Following the downside consolidation overnight, gold broke the range to the downside, confirming a symmetrical triangle breakdown on the hourly sticks. The price closed below the rising trendline (pattern) support at $1927.42.
The move lower exposes the pattern target at $1895. Ahead of that level, the bulls could defend last Friday’s low of $1916.42. A break below which will put a $1900 mark to test. The 14-day Relative Strength Index (RSI) points south in the bearish territory, backing the case for additional declines.
Alternatively, the recovery attempts could meet the robust upside barrier around $1930, the confluence of the bearish 21-hourly Simple Moving Average (HMA), pattern resistance and horizontal 50-HMA.
A sustained break above the latter could fuel a rally towards the next hurdle of the downward-sloping 100-HMA at $1940. Acceptance above the horizontal 200-HMA at $1949.29 is critical to recall the buyers.
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