Gold maintains a modest rebound above $1,920 after Thursday’s steep decline. In the wake of divergent September PMI figures in the U.S., the 10-year U.S. Treasury bond yield saw a nearly 1% drop, settling at approximately 4.45%. This facilitates XAU/USD holding its ground in positive territory.
The Technical Outlook on Gold (XAU/USD)
The Gold market started with a bull market this week, and the hopes were high. Investors were ambitious, as they set targets for breaking the $1950 resistance. However, bearish sentiment around that level appears to be strong, and as a result, this led to price retracement, which persisted until the bulls found solid ground at the $1919 price level. This new support level is a higher support level. The market is beginning to have higher lows, and while the bears have also shifted their resistance to a lower level, which is $1950, the market may consolidate around $1925.
The indicators Bollinger Bands, Relative Strength Index, and Moving Average Convergence and Divergence indicate the market is moving toward equilibrium. This further supports the consolidation expectation.
The Fundamental Outlook on Gold (XAU/USD): Market Insight: US Dollar Pulls Back from Recent Highs, Gold Faces Resistance
The US dollar is undergoing a correction phase after reaching a six-month high against its major counterparts. The calmness in the market is partly attributed to the Bank of Japan’s (BoJ) steadfast policy stance, which contrasted with the US Federal Reserve’s (Fed) recent hawkishness, signaling a potential ‘higher for longer’ interest rate outlook. The BoJ has opted to maintain its ultra-easy monetary policy, signaling a lack of urgency in unwinding its substantial monetary stimulus.
Amid the US dollar’s retreat, gold prices are seeing a resurgence, reaching a critical resistance level. However, further upward momentum remains uncertain due to a renewed surge in US Treasury bond yields. The 10-year US Treasury bond yield is flirting with levels not seen in 16 years, currently at 4.511%.
Later today, gold traders will closely monitor business PMI data from the US, UK, and Eurozone for insights into the global economic landscape, particularly as major economies teeter on the edge of a possible recession. If discouraging PMI reports trigger risk aversion, the US dollar may experience increased demand as a safe-haven asset, potentially impeding gold’s recovery.
End-of-week trading dynamics are expected to continue influencing US dollar valuations, thereby impacting the price action of gold.
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