Gold Price Analysis: XAU/USD drops back towards $1700, breaking out of prior range


  • Gold has been on the back foot in recent trade, with spot prices breaking below last week’s $1720s-$1740s range.
  • Quarter-end flows, US data and President Biden’s infrastructure announcement are going to be the key drivers this week.

Spot gold (XAU/USD) prices have been on the back foot in recent trade, with spot prices breaking to the south of last week’s $1720s-$1740s range, though remaining supported to the north of the $1700 level. That means that finally, after seven sessions of being locked within a few dollars of it 21-day moving average, XAU/USD appears to have dropped back away from this level. For reference, the 21-day moving average sits just above $1724. To the downside, gold bears will be eyeing a test of the psychological $1700 level, which happens also to coincide with the 12 March lows. Beyond that, the annual lows sit at just under $1680 and were set back on 8 March.

Driving the day

Not a great deal of new news for financial market participants to get excited about, or at least not anything that will significantly change the outlook for monetary and fiscal policy in the US and the US economy’s growth outlook (naturally, these are key drivers of XAU/USD). But these drivers will be coming later in the week; US President Joe Biden will give more details on his (touted to be) multi-trillion Recovery package. The White House has said that the package is going to be unveiled in two halves with the first to focus most heavily on infrastructure – this ought to support the narrative of a strong US economic recovery in 2021 and likely throughout Biden’s first term as President.

The above narrative has support USD as of late and put upwards pressure on long-term US government borrowing costs, two factors that are typically a negative for precious metals. With market participants becoming increasingly bullish on the US dollar as the US economic outlook begins to look increasingly favourable versus the global economic outlook and the Fed seemingly having gone well past peak dovishness, many analysts are becoming increasingly bearish on gold.

But the US economy may face some bumps in the coming months which could hurt USD and push yields lower if unfavourable events 1) hurt growth expectations for 2021 and 2) encourage a more dovish than expected Fed – such an occurrence could be a third wave of the Covid-19 virus; over the last two weeks, new infections are up in the US as the country struggles to contain the spread of the more transmissible and deadly UK strain of the virus. However, with the most vulnerable in the country now having been vaccinated, a return to the full-scale lockdowns seen in the past seems unlikely. Either way, a third wave could provide some much-needed impetus for the gold bulls, even if only in the short-term.

Other risk events to note this week include 1) unpredictable quarter-end rebalancing flows, 2) the March ISM manufacturing PMI survey on Thursday and 3) an unusual US NFP release; the latest jobs report is being released on a US (and European) market holiday, meaning there will be very few market participants to trade the reaction to the data. Volatility in overseas markets is likely to be very high given very thin liquidity and such volatility is likely to spill-over into the reopening of US and European markets next week. Stronger than expected US data could reinforce the above-mentioned narrative of a strong US recovery, which is unlikely a positive for gold.

XAU/Usd

Overview
Today last price 1710.98
Today Daily Change -21.71
Today Daily Change % -1.25
Today daily open 1732.69
 
Trends
Daily SMA20 1724.42
Daily SMA50 1782.75
Daily SMA100 1821.99
Daily SMA200 1860.61
 
Levels
Previous Daily High 1736.82
Previous Daily Low 1721.69
Previous Weekly High 1747.12
Previous Weekly Low 1721.69
Previous Monthly High 1871.9
Previous Monthly Low 1717.24
Daily Fibonacci 38.2% 1731.04
Daily Fibonacci 61.8% 1727.47
Daily Pivot Point S1 1723.98
Daily Pivot Point S2 1715.27
Daily Pivot Point S3 1708.85
Daily Pivot Point R1 1739.11
Daily Pivot Point R2 1745.53
Daily Pivot Point R3 1754.24

 

 

Share: Feed news

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Recommended content


Recommended content

Editors’ Picks

AUD/USD remains vulnerable near 26-month low amid bullish USD

AUD/USD remains vulnerable near 26-month low amid bullish USD

AUD/USD holds steady above the 0.6200 mark on Friday, though it remains close to its lowest level since October 2022 touched the previous day. The USD hovers near a two-year top on the back of the Fed's hawkish signal and a weaker risk tone. Furthermore, the RBA's dovish shift, concerns about China's economic recovery and trade war fears undermine the Aussie. 

AUD/USD News
USD/JPY advances to a five-week high, around 158.00 neighborhood

USD/JPY advances to a five-week high, around 158.00 neighborhood

USD/JPY hit a five-month top on Friday in the wake of the Fed's hawkish outlook and the BoJ's decision to keep interest rates steady. Bulls largely shrugged off data showing that Japan's National CPI rose in November, which bodes well for an additional interest rate hike by the BoJ. 

USD/JPY News
Gold price oscillates in a range below $2,600 amid mixed cues

Gold price oscillates in a range below $2,600 amid mixed cues

Gold price consolidates below the $2,600 mark following the previous day's good two-way price move and remains close to over a one-month low. The Fed signaled a cautious path of policy easing next year, which remains supportive of elevated US bond yields and assists the USD in standing firm near a two-year high. 

Gold News
Bitcoin's trajectory shows similarities with previous cycles as long-term holders book profits of $2.1 billion

Bitcoin's trajectory shows similarities with previous cycles as long-term holders book profits of $2.1 billion

Glassnode's Week on Chain report revealed the similarities between the current Bitcoin uptrend and previous cycles amid changing market conditions. Meanwhile, long-term investors began distributing their tokens at the $100K level, culminating in a new all-time high of $2.1 billion in realized profits.

Read more
Bank of England stays on hold, but a dovish front is building

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.

Read more
Best Forex Brokers with Low Spreads

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.

Read More

Forex MAJORS

Cryptocurrencies

Signatures