- Gold consolidates in a tight range before the next push higher.
- Investors await the FOMC minutes, as gold hovers near multi-month tops.
- A potential bull pennant on the 4H chart keeps gold buyers hopeful.
Gold (XAU/USD) consolidated in a tight range near three-month highs for the most part of Tuesday, unable to find a strong footing above the $1870 level. The decline in the US dollar, amid upbeat market mood and weaker housing data, failed to motivate gold price, as the Treasury yields continued to hold the higher ground, with the 10-year rates around 1.65%. The optimism over the economic reopening Euro area combined with encouraging vaccine patent waiver news kept the sentiment buoyed, keeping a check on gold’s upside. Meanwhile, gold’s corrective pullback was limited by growing concerns over higher inflation expectations, which weighed on the Wall Street indices.
In the lead up to the FOMC minutes showdown, gold extends its consolidative mode below $1870, as a sense of caution prevails, with investors closely following the inflation narrative. The FOMC minutes are expected to read dovish while reiterating the Fed policymakers’ stance on rising inflation as ‘transitory’. The Fed minutes could reinforce the dovish expectations, which could trigger a fresh rally in gold price while smashing the greenback across the board. In the meantime, the dollar dynamics will continue to influence gold’s price action. It’s worth noting that inflows into gold exchange-traded funds (ETF) have increased, as it is seen as an inflation hedge.
Gold Price Chart - Technical outlook
Gold: Four-hour chart
The recent surge that followed a consolidation has carved out a bull pennant on the four-hour chart, with the uptrend likely to continue on a sustained break above the falling trendline resistance at $1871.
The three-month highs of $1874 could be put to test once again, opening doors towards the $1900 mark.
The Relative Strength Index (RSI) has retraced from the overbought territory, allowing room for more upside.
On the flip side, a four-hourly closing below the rising trendline support at $1865 could invalidate the bullish continuation formation.
The upward-pointing 21-simple moving average (SMA) at $1855 is likely to test the bearish commitments.
The next line of defense for gold bulls is seen at the $1850 psychological level.
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
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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.