Gold consolidates near 5.5-week highs amid US yield curve inversion

Gold is trading near a 5.5-week high of $1,243 hit on Tuesday.
The US yield curve inversion could trigger dollar sell-off, leading to further gains in the yellow metal.

Omkar Godbole FXStreet Contributor

Gold is currently trading at $1,240 per Oz, having hit a high of $1,243 on Tuesday - the level last seen on Oct. 26.

The yellow metal crossed the resistance of the descending trendline connecting the Oct.26 high and Nov. 7 high on Monday, signaling a resumption of the rally from the Nov. 13 low of $1,196. As a result, prices rose to 5.5-week highs and could rise even further in the short-term, as the bull breakout is backed by curve inversion in the US.

The spread between the 5-year and 2-year treasury yields turned negative (inverted) earlier this week. In response, the Dow Jones Industrial Average fell by 800 points on Tuesday, validating the argument that curve inversion is an advance indicator of economic recession.

The risk aversion will likely worsen, sending the greenback lower and the yellow metal higher towards its 200-day MA of $1,256 if the spread between the 10-year and 2-year turns negative. As of writing, the spread stands at 11 basis points and the dollar index is flatlined at 97.00.

Gold Technical Levels

XAU/USD

Overview:
    Today Last Price: 1239.62
    Today Daily change: 2.3e+2 pips
    Today Daily change %: 0.188%
    Today Daily Open: 1237.3
Trends:
    Previous Daily SMA20: 1220.4
    Previous Daily SMA50: 1222.65
    Previous Daily SMA100: 1210.42
    Previous Daily SMA200: 1233.32
Levels:
    Previous Daily High: 1239.36
    Previous Daily Low: 1233.5
    Previous Weekly High: 1231.8
    Previous Weekly Low: 1211.2
    Previous Monthly High: 1237.4
    Previous Monthly Low: 1196.4
    Previous Daily Fibonacci 38.2%: 1235.74
    Previous Daily Fibonacci 61.8%: 1237.12
    Previous Daily Pivot Point S1: 1234.08
    Previous Daily Pivot Point S2: 1230.86
    Previous Daily Pivot Point S3: 1228.23
    Previous Daily Pivot Point R1: 1239.94
    Previous Daily Pivot Point R2: 1242.57
    Previous Daily Pivot Point R3: 1245.79

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD: Gains remain capped by 1.1650

EUR/USD remains in recovery-mode following the closing bell in Euroland on Wednesday, hovering around the 1.1650 zone amid renewed downside pressure on the US Dollar and a marginal improvement in the global sentiment.

GBP/USD appears bid around 1.3370

GBP/USD reverses part of its recent multi-day decline, gathering some balance and managing to reach the 1.3400 region, where some initial resistance seems to have turned up. Cable’s uptick comes in response to some loss of momentum in the Greenback despite the geopolitical scenario remaining fragile.

Gold recovers modestly despite intensifying Middle East crisis

Gold keeps its daily gains well in place, although a break above the $5,200 mark per troy ounce still remains elusive on Wednesday. The yellow metal’s rebound comes in response to the persistent flight-to-safety amid intense geopolitical tensions in the Middle East and the bearish performance of the US Dollar.