- Gold Price fades the bounce off 100-DMA, bears approach short-term support amid firmer USD.
- US Treasury yields regain upside momentum amid hawkish Fed expectations.
- US ISM Manufacturing PMI, risk catalysts to direct short-term Gold Price moves.
- Fed needs to go beyond market expectations to keep USD firmer, NFP may help traders as well.
Gold maintained its offered tone through the first half of the European session and was last seen flirting with the 100-day SMA support, around the $1,880 area. The prospects for a more aggressive policy tightening by the Fed remained supportive of elevated US Treasury bond yields. This, in turn, was seen as a key factor that continued driving flows away from the non-yielding yellow metal.
Hence, the focus will remain glued to the outcome of a two-day FOMC monetary policy meeting, starting this Tuesday. The catalysts which need significant attention from the market participants are the balance sheet reduction and further guidance on interest rates. The guidance from the fed will provide the roadmap for marching towards the neutral rates. The age of helicopter money is shifting to a tight liquidity environment, which will bring a long-term change in various assets.
In addition to the highly anticipated Fed decision, investors this week will take cues from important macro releases scheduled at the beginning of a new month. A rather busy week kicks off with the release of the US ISM Manufacturing PMI, due later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to gold prices.
In the meantime, a generally positive tone around the equity markets might continue to undermine the safe-haven XAU/USD. Moreover, the worsening COVID-19 situation in the world’s largest gold consumers, namely India and China, also weighed on gold prices. Recently, India marked the highest active covid cases in five weeks while China’s Beijing braces for more strict activity controls amid the fresh spread of the virus. The fundamental backdrop seems tilted in favour of bearish traders, though the key event/data risks warrant some caution before placing aggressive directional bets.
Gold technical analysis
Bearish MACD signals and descending RSI line, not oversold, justifies the Gold Price downside towards a convergence of the 100-DMA and 50% Fibonacci retracement (Fibo.) August 2021 to March 2022 upside, near $1,878.
The Gold Price weakness past-$1,878, however, will be challenged by an upward sloping trend line from August 2021, near $1,859, followed by the 200-DMA level near $1,834.
Meanwhile, recovery moves need validation from the 50-DMA level near $1,938. Following that, the upside momentum towards April’s peak of $1,998 can’t be ruled out.
Gold: Daily chart
Trend: Further weakness expected
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