XAUUSD Looks South Amid Firmer Yields, 200-DMA at Risk?

  • Gold prices remain under pressure amid renewed USD strength.
  • The rebound in Treasury yields could add weight to the yellow metal.
  • XAUUSD Tested 21-DMA Support, More Downsides Ahead?

The price of gold reversed course and moved into the red zone on Monday, starting the week off on the wrong foot. Despite the yellow metal’s pullback, the bulls managed to defend the $1,850 level. The metal saw good trades in both directions but remained within a familiar trading range between $1,870 and $1,840, having struggled to capitalize on Friday’s rebound. Initially, XAUUSD advanced towards two-week highs of $1,870 as the US Dollar extended its downward correction at the start of the Nonfarm Payrolls week. US Treasury yields also lingered near month lows, providing support for bullion. China’s covid-easing optimism, combined with reduced bets for aggressive Fed tightening, lifted overall market sentiment, weighing negatively on the safe-haven dollar.

However, the tide turned in favor of bearish gold in U.S. trading after German inflation surprised bullish markets and hit a record high, reigniting worries about runaway inflation and growth prospects. . The dollar rebounded strongly, although it remained constrained by weaker liquidity due to a Memorial Day holiday in the United States.

The price of gold tries a minor recovery but remains in retreat, as the dollar comes alive on Tuesday. Germany’s fears over inflation-led global growth amid tighter policy remain in play, while improving Chinese trade activity and policy support measures from the world’s second-largest economy have managed to calm the nerves, for the moment. Additionally, a further easing of covid restrictions in China is helping to support the rally in Asian equities. If risky flows come back strong, the dollar could resume its decline, although the sentiment around the bond market is key to place new bets on the price of gold. US yields are rebounding strongly, with benchmark 10-year yields rising around 3.5% so far. Also worth noting is the preliminary print on Eurozone inflation and US CB consumer confidence data for further clues on overall market sentiment.

Gold Price Chart: Daily Chart

The price of gold has tested the bearish 21-day moving average (DMA), now at $1,849, with bears eyeing a decisive break below it to extend the ongoing bearish momentum.

The 14-day Relative Strength Index (RSI) is below the middle line, which leaves room for further declines.

Acceptance below the 21-DMA will trigger a further decline towards the horizontal 200-DMA at $1,840.

A daily close below the latter is needed to dampen the recovery and bring focus back to the May 18 low of $1,807.

On the other hand, retracing the daily highs of $1,857 is key to gaining the upper hand towards yesterday’s high of $1,864.

Higher, the two-week highs at $1,870 will be next on buyers’ radars, above which the slightly bullish 100-DMA at $1,888 will be challenged.


Comments are closed.