- Gold price remains exposed to downside risks amid a firmer US dollar.
- Covid concerns, US stimulus uncertainty boost USD’s safe-haven appeal.
- Gold’s four-hour chart points to deeper loss amid a potential bear flag
Having faced rejection above $1830 for the third day in a row, gold price came under heavy selling pressure on Tuesday and fell as low as $1792, clocking fresh weekly lows. Gold’s correction from two-month highs of $1834, as the US dollar rebound remained the main underlying theme. Investors faded the effects of an NFP shocker and a likely delay in the Fed’s tapering plan, as economic growth concerns resurfaced amid a spike in the Delta covid cases in the US. The risk-off mood seeped in with the return of the US traders, bolstering the safe-haven demand for the dollar at gold’s expense. Investors also remained cautious ahead of the ECB policy decision on Thursday while China’s regulatory crackdown extending beyond the tech sector also weighed on the market mood.
On Wednesday, gold price is licking its wounds after the previous sell-off, as the US dollar holds onto its recent gains amid a dour mood and weaker yields. Escalating Delta covid concerns in the US combined with expectations of ECB tapering keep the safe-haven demand for the greenback underpinned while limiting gold’s bounce. US President Joe Biden on Thursday will present a six-pronged strategy aimed at fighting the spread of the highly contagious Delta variant and increasing covid vaccinations. Further, uncertainty over the US infrastructure stimulus package could also likely weigh on gold price. According to CNN News, “House Republicans could face increased pressure to vote against a bipartisan infrastructure package when they return to Washington later this month.”
Looking ahead, in absence of any first-tier US economic news, the covid concerns could continue to influence the broader market sentiment, impacting the dollar and gold price. Although, the US JOLT jobs opening data could offer some trading incentives.
Gold Price Chart - Technical outlook
Gold: Four-hour chart
As observed on the four-hour chart, gold price has carved out a bear flag pattern, in light of the recent consolidation that followed Tuesday’s slide.
A sustained break below the confluence of the 200-Simple Moving Average (SMA) and rising trendline support at $1795 could confirm the bearish continuation pattern, calling for further downside towards $1760.
Ahead of that the mid-August lows around $1775 could test the bullish commitments.
The Relative Strength Index (RSI) is heading back towards the oversold territory, currently at 32.30, suggesting that there is more room to drop for gold price.
Alternatively, powerful resistance at $1802 will likely keep gold bulls capped, as that level is the intersection of the horizontal 100-SMA and rising trendline resistance.
A four-hourly candlestick closing above the latter could reinforce the recovery momentum, opening doors for a test of the next relevant upside barrier at $1814, the 50-SMA.
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.
Recommended Content
Editors’ Picks
AUD/USD holds steady near 0.6250 ahead of RBA Minutes
The AUD/USD pair trades on a flat note around 0.6250 during the early Asian session on Monday. Traders brace for the Reserve Bank of Australia Minutes released on Tuesday for some insight into the interest rate outlook.
USD/JPY consolidates around 156.50 area; bullish bias remains
USD/JPY holds steady around the mid-156.00s at the start of a new week and for now, seems to have stalled a modest pullback from the 158.00 neighborhood, or over a five-month top touched on Friday. Doubts over when the BoJ could hike rates again and a positive risk tone undermine the safe-haven JPY.
Gold price bulls seem non-committed around $2,620 amid mixed cues
Gold price struggles to capitalize on last week's goodish bounce from a one-month low and oscillates in a range during the Asian session on Monday. Geopolitical risks and trade war fears support the safe-haven XAU/USD. Meanwhile, the Fed's hawkish shift acts as a tailwind for the elevated US bond yields and a bullish USD, capping the non-yielding yellow metal.
Week ahead: No festive cheer for the markets after hawkish Fed
US and Japanese data in focus as markets wind down for Christmas. Gold and stocks bruised by Fed, but can the US dollar extend its gains? Risk of volatility amid thin trading and Treasury auctions.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.