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November 16, 2022

XAUUSD steadies around $1,780

- Gold holds steady near its highest level since mid-August amid a softer US Dollar.

- Bets for less aggressive rate hikes by the Federal Reserve weigh on the greenback.

- Sliding US bond yields further undermines the USD and benefits the commodity.

- A recovery in the risk sentiment seems to cap any further gains for the XAUSD.

Gold attracts some dip-buying near the $1,770 area on Wednesday and steadily climbs back closer to its highest level since mid-August touched the previous day. The XAUUSD holds steady above the $1,780 level through the early North American session, though a slight recovery in the risk sentiment keeps a lid on any further gains.

Fresh US Dollar selling offers support to gold

The US Dollar (USD) fails to capitalize on the overnight bounce from a three-month low and meets with a fresh supply, which, in turn, offers some support to the dollar-denominated gold. The markets now seem convinced that the Federal Reserve (Fed) will hike interest rates at a slower pace in the coming months amid signs of easing inflationary pressures. The speculations were fueled by a surprise drop in US consumer inflation during October. Furthermore, Tuesday's softer Producer Price Index (PPI) reinforces the peak inflation narrative and continues to weigh on the buck.

Softer US bond yields further benefit the XAUUSD

The repricing of the pace of the Fed's rate-hiking cycle, meanwhile, keeps the US Treasury bond yields depressed. In fact, the yield on the benchmark 10-year US government bond languishes near its lowest level for the yield since October 5. This is seen as another factor undermining the USD and leading additional support to the non-yielding yellow metal. The intraday uptick, however, lacks bullish conviction. This, in turn, makes it prudent to wait for some follow-through buying before traders start positioning for any extension of a two-week-old strong uptrend.

A positive risk tone, and upbeat US Retail Sales cap gains for the metal

United States President Joe Biden’s remarks earlier this Wednesday eased worries about an explosion in Poland. Moreover, early information indicated that the missile that hit Poland may have been fired by Ukraine at an incoming Russian missile. The incoming headlines infuse some stability in the financial markets, which, in turn, acts as a headwind for the safe-haven gold. Adding to this, the better-than-expected US Retail Sales figures provide a much-needed respite to the USD and further contribute to capping the XAUUSD. Nevertheless, the fundamental backdrop suggests that a corrective pullback might still be seen as a buying opportunity.

Gold technical outlook

From a technical perspective, the $1,785-$1,786 region now seems to have emerged as an immediate resistance. A sustained strength beyond should allow gold to reclaim the $1,800 psychological mark. The said handle coincides with the very important 200-day SMA and should act as a pivotal point to determine the next leg of a directional move for the XAUUSD.

On the flip side, dips towards the $1,770-$1,765 region might continue to attract some buyers. This should help limit the downside for gold near the $1,755 level. Failure to defend the said support levels might prompt some technical selling and accelerate the corrective slide towards the $1,734-$1,732 strong horizontal resistance breakpoint, now turned support.

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