|

Gold Price Analysis: XAU/USD bullish bias starting to fade

  • Gold is testing critical support as the US dollar shows there is still some life to it.
  • The stimulus is now fading which is a hurdle for the bullish trend in gold.

Gold prices are testing the bull's commitments at the support structure around $1,906 in what could be a final test before the next leg higher of the bullish trend.

At the time of writing, gold, XAU/USD, is trading at the lows of the day, $1,905, having travelled from a high of $1,955.62, down some 2% to start the week.

Gold prices have been in consolidation since correcting from all-time highs in late July and subsequently printing a low of 1861 at the start of August. 

The price has chopped sideways, decelerating its daily range as markets try to get a handle on the various features of today's market conditions.

One of the main drivers for precious metals has been the notion that real rates will be lower for longer as the Fed maintains a dovish outlook for several years ahead with inflation grounded. 

However, with such sentiment already priced in, bloating positioning data could be a hurdle for the bulls at this juncture.

The stimulus is now fading

Given that the positioning data reflected expectations that Federal Open market Committee officials would strike a more dovish tone and suggest changes to the QE program, which they did not, we could be seeing some disappointments in the price action now.

Meanwhile, a surge in the US dollar has not helped the spot market at the start of this week. 

The DXY is trading at 93.66 and higher by some 0.7%. 

With fiscal stimulus still in question, even more so following the death of Justice Ruth Bader Ginsburg, the probability that a Phase 4 deal would not be dropped before the election. 

This should underpin the greenback because investors are less likely to take on risk until a fresh stimulus deal is struck. 

The single currency, the euro, should also be monitored as it feels the pressure of a second wave of the coronavirus on mainland Europe. 

The European Central Bank is in focus this week following the Financial Times publishing of a source's story that the ECB will launch a review of its PEPP programme.  

The ECB intends to examine the length of the PEPP set for June 2021 but also look at transferring its flexibility to other purchase programmes. 

It is still not clear if this will be a dovish or hawkish outcome, but given the risks of the second wave of the virus which will clash with flu season, the chances are the ECB could well be considering caring the tool into other programmes which would be dovish. 

On the other hand, PEPP would not be used in full, it will be hawkish and significantly weigh on the US dollar, likely supporting the bullish case for both the euro and gold.

Gold levels

 

Overview
Today last price1907.56
Today Daily Change-42.99
Today Daily Change %-2.20
Today daily open1950.55
 
Trends
Daily SMA201945.37
Daily SMA501935.06
Daily SMA1001836.48
Daily SMA2001714.71
 
Levels
Previous Daily High1960.16
Previous Daily Low1943.09
Previous Weekly High1973.64
Previous Weekly Low1932.88
Previous Monthly High2075.32
Previous Monthly Low1863.24
Daily Fibonacci 38.2%1953.64
Daily Fibonacci 61.8%1949.61
Daily Pivot Point S11942.37
Daily Pivot Point S21934.2
Daily Pivot Point S31925.3
Daily Pivot Point R11959.44
Daily Pivot Point R21968.34
Daily Pivot Point R31976.51

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD extends slide below 1.1700

The EUR/USD pair nears its weekly low at around 1.1660 in the American session on Tuesday, retreating from the 1.1750 price zone tested earlier in the day. Cautiously optimistic markets support the US Dollar in the near term.

GBP/USD consolidates around 1.3500; looks to US macro data for fresh impetus

The GBP/USD pair oscillates in a narrow range, around the 1.3500 psychological mark during the Asian session on Wednesday, and for now, seems to have stalled the previous day's retracement slide from its highest level since September 18. Moreover, the fundamental backdrop seems tilted in favor of bullish traders and suggests that the path of least resistance for spot prices is to the upside.

Gold extends upside to near $4,500 on Venezuela turmoil

Gold price climbs to near $4,500 during the early Asian trading hours on Wednesday. The precious metal rises by more than 1% in the day as geopolitical tensions and expectations of US rate cuts keep demand for gold high. The US ISM Services Purchasing Managers Index report will be published on Wednesday. 

Pump.fun prepares for early-year rally as DEX volume skyrockets

Pump.fun (PUMP) is rising alongside crypto majors such as Bitcoin (BTC) and is trading above $0.002400 at the time of writing on Tuesday. The Decentralized Exchange (DEX) native token outlook builds on a bullish tone developed since December 30.

Implications of US intervention in Venezuela

Events in Venezuela are top of mind for market participants, and while developments are associated with an elevated degree of uncertainty, we are not making any changes to our markets or economic forecasts as a result of the deposition of Nicolás Maduro. 

Cardano holds steady as bulls intensify push for breakout

Cardano rises above the 50-day EMA resistance amid a risk-on mood across the crypto market. The MACD upholds positive divergence, increasing the potential for a 20% breakout to $0.505.