Forex world

December 06, 2022

XAU/USD sits near daily high, around $1,780

- Gold price catches fresh bids amid the emergence of some selling around US Dollar.

- Sliding US Treasury bond yields weighs on USD and benefits the non-yielding metal.

- The upside seems capped amid uncertainty over future rate hikes by Federal Reserve.

Gold price regains positive traction on Tuesday and reverses a part of the previous day's retracement slide from a five-month peak. The steady intraday ascent extends through the early North American session and lifts the XAU/USD to a fresh daily high, around the $1,780-$1,781 region in the last hour.

Weaker US Dollar lends support to Gold price

The US Dollar struggles to capitalize on the overnight solid rebound from its lowest level since late June and attracts some sellers near a technically significant 200-day Simple Moving Average (SMA). As investors seek clarity on the Federal Reserve's rate-hike path, a fresh leg down in the US Treasury bond yields weighs on the Greenback. This, in turn, is seen as a key factor driving flows towards the Dollar-denominated Gold price.

Against the backdrop of Friday's upbeat monthly jobs report from the United States, the better-than-expected ISM Services PMI released on Monday pointed to a resilient economy. The incoming positive US macro data raises fears that the Federal Reserve might lift rates more than projected. Investors, however, seem convinced that the US central bank will slow the pace of its policy-tightening cycle and anticipate a 50 bps rate hike in December.

Focus remains on next week’s key data/event risks

Hence, the market focus will remain glued to the Federal Open Market Committee (FOMC) policy meeting on December 13-14. Heading into the key event risk, investors will confront the release of the latest US consumer inflation figures for November, which might influence the Federal Reserve's near-term policy outlook. This, in turn, will play a key role in driving the non-yielding Gold price and help determine the next leg of a directional move.

Recession fears further underpin safe-haven XAU/USD

In the meantime, growing worries about a deeper global economic downturn overshadow the optimism led by the easing of COVID-19 restrictions in China. This is evident from the prevalent cautious mood around the equity markets and should continue to lend some support to the safe haven Gold price. Traders, however, might refrain from placing aggressive bets and prefer to move to the sidelines in the absence of any major market-moving US macro data.

Gold price technical outlook

From a technical perspective, repeated failures to find acceptance or build on the momentum beyond the very important 200-day SMA favours the XAU/USD bears. That said, the emergence of fresh buying on Tuesday warrants some caution before confirming a near-term top for Gold price and positioning for a deeper corrective pullback.

Meanwhile, a subsequent move back above the $1,782-$1,783 horizontal resistance could lift Gold price back to the 200 DMA, closer to the $1,800 mark. The next relevant hurdle is pegged near the $1,810 area, or the multi-month top touched on Monday, above which Gold price seems poised to appreciate further. The momentum could then accelerate towards the $1,830 intermediate hurdle en route to the $1,843-$1,845 supply zone.

On the flip side, the overnight swing low, around the $1,769-$1,768 region, now becomes immediate support to defend ahead of the $1,761-$1,760 horizontal resistance breakpoint. A convincing break below will negate any near-term positive outlook and shift the bias in favour of bearish traders. Gold price might then turn vulnerable to accelerate the fall further towards the $1,738-$1,737 area before dropping to the $1,725 level.

Gold price key levels to watch


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