• Gold witnessed some profit-taking on Wednesday and eroded a major part of the overnight gains.
  • Strong recovery in the equity markets turned out to be a key factor that weighed on the commodity.
  • Weaker USD, stagflation fears, Ukraine crisis warrant some caution for aggressive bearish traders.

Gold stalled its recent strong bullish momentum to the highest level since August 2020 and witnessed a corrective pullback on Wednesday. The downward trajectory extended through the mid-European session and dragged spot prices back closer to the key $2,000 psychological mark. The global equity markets made a solid comeback in reaction to the news that Russian Foreign Minister Sergey Lavrov and his Ukrainian counterpart Dmytro Kuleba have agreed to meet on Thursday. This would be the first potential talk between the two officials since Russian troops invaded Ukraine on February 24 and revived hopes of a diplomatic solution to end the war in Ukraine. The development triggered a risk-on trade, which, in turn, was seen as a key factor that prompted traders to lighten their bullish bets around the safe-haven precious metal.

This, along with a fresh leg up in the US Treasury bond yields, drove flows away from the non-yielding yellow metal. The recent monster gains in commodity prices have been fueling stagflation fears, which, acted as a tailwind for the US bond yields. Investors remain concerned about the rapidly deteriorating outlook and an inflation shock in the global economy. This might lend some support to gold, which is considered as a hedge against inflation. Apart from this, the ongoing US dollar retracement slide from the highest level since May 2020 could limit losses for the dollar-denominated commodity. Moreover, the risk of a further escalation in tensions between Russian and Western powers should cap the optimistic move in the markets.

In fact, US President Joe Biden on Tuesday imposed an immediate ban on Russian oil and other energy imports. Britain matched the move and announced that it would phase out the import of Russian oil by the end of 2022. the European Union announced new sanctions against Russian individuals and Belarus banks. The Russian foreign ministry reportedly said that the response to the Western sanctions will be sensitive and precise. The fundamental backdrop supports prospects for the emergence of some dip-buying, warranting some caution before confirming that gold prices have topped out and positioning for any meaningful corrective slide.

Technical outlook

From a technical perspective, a subsequent decline below the $2,000 mark could get extended towards the next relevant support near the $1.980 area. Some follow-through selling would negate the near-term positive bias and prompt aggressive long-unwinding trade, paving the way for deeper losses. Gold might then turn vulnerable to accelerate the fall towards the $1,950 support zone.

On the flip side, momentum back above the $2,020-$2,022 area now seems to confront resistance near the $2,050 region. This is followed by the overnight swing high, around the $2,070 zone, and the August 2020 peak near the $2,075 region. Sustained strength beyond would mark an uncharted territory gold and set the stage for a further near-term appreciating move, possibly towards the $2,100 round figure.

Key levels to watch

XAU/USD

Overview
Today last price 2016.56
Today Daily Change -34.58
Today Daily Change % -1.69
Today daily open 2051.14
 
Trends
Daily SMA20 1907.58
Daily SMA50 1852.2
Daily SMA100 1827.38
Daily SMA200 1811.29
 
Levels
Previous Daily High 2070.54
Previous Daily Low 1981.18
Previous Weekly High 1970.29
Previous Weekly Low 1890.98
Previous Monthly High 1974.51
Previous Monthly Low 1788.67
Daily Fibonacci 38.2% 2036.4
Daily Fibonacci 61.8% 2015.32
Daily Pivot Point S1 1998.03
Daily Pivot Point S2 1944.93
Daily Pivot Point S3 1908.67
Daily Pivot Point R1 2087.39
Daily Pivot Point R2 2123.65
Daily Pivot Point R3 2176.75

 

 

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.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD recovers above 1.0400, looks to post weekly gains

EUR/USD recovers above 1.0400, looks to post weekly gains

EUR/USD regained its traction after dropping toward 1.0350 in the early American session and climbed above 1.0400. Trading conditions remain thin on Black Friday and the pair remains on track to end the week in positive territory.

EUR/USD News

GBP/USD recovers toward 1.2100 as US Dollar loses strength

GBP/USD recovers toward 1.2100 as US Dollar loses strength

GBP/USD managed to stage a recovery toward 1.2100 in the American session on Friday and now looks to register gains for the third straight week. The US Dollar struggles to preserve its strength as markets remain subdued on Black Friday. 

GBPUSD News

Gold steadies near $1,750 as US yields retreat

Gold steadies near $1,750 as US yields retreat

Gold price continues to move sideways at around $1,750 heading into the weekend. The benchmark 10-year US Treasury bond yield retreated from the daily high it touched above 3.75% earlier in the day, allowing XAU/USD to erase a portion of its daily losses.

Gold News

Bitcoin: Assessing chances of one last bear market rally for 2022

Bitcoin: Assessing chances of one last bear market rally for 2022

Bitcoin price is in a good place to trigger another bear market rally from a high-time frame perspective. This development, combined with the optimistic outlook seen in on-chain metrics, further strengthens the possibility of a happy ending to 2022.

Read more

FX next week and yield curve inversions

FX next week and yield curve inversions

Since the Fed's last raise November 3, Fed Funds rate opens and closes at 3.83. The Fed Funds rate once traded freely on its own with highs and lows as any financial instrument. In 2000, Central banks implemented meetings every 6 weeks.

Read more

Forex MAJORS

Cryptocurrencies

Signatures