Gold stays above 50-day SMA amid fresh catalysts, USD rebound

The week-start pullback from multi-day high fails to defy Gold buyers’ confidence as the bullion remains above near-term key support, and is recovering, while taking the bids to $1,509 during early Asian session on Tuesday.

Among the key catalysts for the latest recovery, China’s push for further tariff cuts, as conveyed by Politico, and comments from the San Fransico Fed President Mary Daly lead the list. While Fed’s Daly turned down the risk of the US recession, China’s demand to scrap majority of the latest trade tariffs from the US could spoil the latest trade positive environment between the world’s two largest economies.

Also adding to the risk aversion could be the decision on the new Speaker of the House of Commons. Deputy Speaker and a Labour party member Sir Lindsay Hoyle is recently elected to replace John Bercow as the Speaker of the House of Commons in the United Kingdom (UK). While he is considered to have a less controversial background that Bercow, expectations that a Labour member will not step behind from spoiling Conservative plans keep the risk-off in play.

The yellow metal’s declines on Monday could be attributed to the broad US Dollar (USD) strength that relied mainly on the US-China trade positive headlines. Expectations of Chinese President Xi Jinping’s arrival to the United States (US) to sign the much-awaited “Phase One” deal boosted the trade positive sentiment following upbeat comments from the US President Donald Trump and Trade Secretary Wilbur Ross. Some of the streets, like Reuters, also considers the recent risk-off joining positive employment data to move markets away from the rush to risk-safety.

With this, the US 10-year treasury yields stay mostly unchanged to Monday’s 1.78% mark while S&P 500 Futures also clings to 3,075 level.

In addition to trade/Brexit headlines, markets will now look forward to the October month release of China’s Caixin Services Purchasing Managers’ Index (PMI) and monetary policy meeting by the Reserve Bank of Australia (RBA). Having witnessed upbeat prints Caixin Manufacturing PMI recently, a welcome services data, expected 52.8 versus 51.3 earlier, could renew buyers’ confidence. Further, RBA isn’t expected to alter its monetary policy but further policy direction and growth outlook will be closely observed in the statement.

Technical Analysis

Other than 50-day Simple Moving Average (SMA) level of $1,503, a five-week-old rising support line, at $1,485, could restrict the bullion’s near-term declines ahead of highlighting October low, near $1,455.50, to sellers. On the upside, a monthly falling trend line, at $1,518, late-September high surrounding $1,535 and $1,557 become key resistances to watch during upside.