Gold Price Analysis: XAU/USD drops to fresh eight-month lows, inching closer to $1750 level


  • Gold remained under some selling pressure on the last trading day of the week.
  • A broad-based USD strength weighing on the dollar-denominated commodity.
  • The risk-off mood did little to impress bulls or lend any support to the XAU/USD.

Gold edged lower through the early European session and dropped to fresh eight-month lows, around the $1756 level in the last hour.

The precious metal added to the previous day's heavy losses and witnessed some follow-through selling for the second consecutive session on Friday. The overnight slump was sponsored by a sudden spike in the US Treasury bond yields, which tends to drive flows away from the non-yielding yellow metal.

The impressive pace of COVID-19 vaccination and the progress in the US President Joe Biden's proposed $1.9 trillion stimulus package has been fueling hopes for a strong global economic recovery. The reflation trade, along with rising inflation expectations continued pushing the US bond yields higher.

In fact, the yield on the benchmark 10-year US government bond rose beyond 1.50%, or more than one year high. This, in turn, provided a strong lift to the US dollar, which gained traction on the last trading day of the week and exerted additional pressure on the dollar-denominated commodity.

Meanwhile, a fresh wave of the global risk-aversion trade – as depicted by a sharp pullback in the equity markets – did little to impress bulls or lend any support to the safe-haven XAU/USD. The lack of any buying interest favours bearish traders supports prospects for further weakness.

Even from a technical perspective, a break below the $1964-60 cluster support adds credence to the bearish outlook. Hence, a subsequent slide towards testing the $1750 support zone, en-route the $1725-24 region and the $1700 round-figure mark, now looks a distinct possibility.

Market participants now look forward to the US economic docket, featuring the releases of Core PCE Price Index, Goods Trade Balance and Chicago PMI. This, along with the US bond yields, will influence the USD. Apart from this, the broader market risk sentiment might further produce some trading opportunities around the XAU/USD.

Technical levels to watch

XAU/USD

Overview
Today last price 1759.44
Today Daily Change -10.26
Today Daily Change % -0.58
Today daily open 1769.7
 
Trends
Daily SMA20 1813.05
Daily SMA50 1848.27
Daily SMA100 1860.21
Daily SMA200 1860.3
 
Levels
Previous Daily High 1805.86
Previous Daily Low 1765.56
Previous Weekly High 1827.11
Previous Weekly Low 1760.72
Previous Monthly High 1959.42
Previous Monthly Low 1802.8
Daily Fibonacci 38.2% 1780.95
Daily Fibonacci 61.8% 1790.47
Daily Pivot Point S1 1754.89
Daily Pivot Point S2 1740.07
Daily Pivot Point S3 1714.59
Daily Pivot Point R1 1795.19
Daily Pivot Point R2 1820.67
Daily Pivot Point R3 1835.49

 

 

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