Gold Price Analysis: XAU/USD bulls monitoring the US dollar for direction
|- The price of the US dollar has slipped deeper into correction territory, offering upside in gold.
- The potential for gold to run higher is strong from a fundamental backdrop, but technicals should also be considered.
The price of the yellow metal has been up to test the firm resistance area which represents the accumulation of daily lows since August.
At the time of writing, XAU/USD trades at $1,915 between a low of $1,887.18 and $1,918.75.
It has been a wide range for the opening day with there being plenty of risk factors for investors to sift through.
First and foremost, there is a growing sense of urgency with respect to the US stimulus required for the population of the United States for which the US stock market now depends upon.
Meanwhile, there has been an air of optimism surrounding the US president's potential release from hospital which has been helping to support markets.
Precious metals are indeed focused on Trump's health, following a weekend of confusing messages on the severity of his health.
''In the near-term, the market's knee-jerk reaction may have buoyed gold prices as we identify signs of a flight-to-safety amid a risk-off move in markets,'' analysts at TD Securities explained.
Then, investors also have to consider the run-up to the US elections which are slated for November 3rd, but, again that mostly falls down to stimulus again.
''Barring a split government outcome, both administrations are likely to push through a large-scale a fiscal deal in no time that would help de-bottleneck the real rate suppression, lifting precious metals in the process,'' the analysts at TD Securities have explained.
''Considering a Blue Wave would likely result in the largest package, Biden's election odds are increasingly likely to drive gold prices in the coming month.''
However, from a technical analysis perspective, the price of the dollar is compelling.
The DXY has been pressured below the 93.50s.
This is significant as it has broken the late September lows and begs the question as to whether there will be a bullish 5th wave on the daily chart.
Gold and DXY technical analysis
In the above analysis, there is a bullish case in the making considering a number of intermarket implications and price analysis.
As for gold:
The daily chart is showing clear resistance and support.
The price is trapped.
A break of either will be significant and the best place to monitor for a breakout is down on the 4-hour chart.
A break below the 4-hour support will open the potential for a short, but it would be key to find an entry that will allow a breakeven point by the time the price reaches the daily support.
There is a risk that daily support will equate to a bullish trend.
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