Despite a weaker US Dollar, Gold maintains stability at its highest level since mid-August. The dollar is affected by bets on the Federal Reserve raising rates less aggressively. The USD is further devalued by falling US bond rates, which is advantageous for commodities. Any additional advances for the XAUUSD seem to be limited by a resurgence in risk sentiment.
On Wednesday, there is some dip-buying at $1,770, and Gold gradually moves back toward the peak it reached the previous day—the highest point since mid-August. Throughout the early North American session, the XAUUSD maintains its position above $1,780, although a minor improvement in risk sentiment prevents any further advances.
New US Dollar sales provide support for Gold. The US Dollar (USD) cannot profit from the overnight recovery from a three-month low and runs into additional supply, giving the dollar-denominated Gold some support. The Federal Reserve (Fed) will raise interest rates in the following months, but at a slower rate than expected, according to the markets, which have recently come to believe this. The rumors were stoked by an unexpected decline in US consumer inflation in October. Additionally, Tuesday’s weaker Producer Price Index (PPI) supports the idea of peak inflation and keeps the dollar down.
Lower US bond rates further benefit the XAUUSD.
Meanwhile, the Fed’s rate-hiking cycle is being slowed down, which keeps the rates on US Treasury bonds low. The benchmark 10-year US government bond yield is now hovering around its lowest since October 5. This is another reason for weakening the USD and further strengthening the non-yielding yellow metal. But there needs to be more positive confidence in the intraday increase. Thus, it is wise to hold off on setting up for any extension of a two-week-old strong upswing until there has been some follow-through purchasing.
Positive risk sentiment and buoyant US retail sales limit the metal’s gains. The words made by U.S. President Joe Biden on Wednesday reduced concerns about an explosion in Poland. Early reports also suggested that Ukraine could have launched the missile that struck Poland in response to an approaching Russian missile. The incoming news provides the financial markets some stability, which, in turn, works against the safe-haven Gold. Additionally, the better-than-expected US Retail Sales statistics provide the USD a much-needed reprieve and help to restrict the XAUUSD further. The underlying context indicates that a corrective retreat may still be seen as a purchasing opportunity.
Technical forecast for Gold
Technically speaking, an immediate resistance now seems to have formed in the $1,785–$1,786 range. Gold should be able to retake the $1,800 psychological threshold with further strength. The handle above should serve as a vital milestone to identify the following leg of a directional move for the XAUUSD since it lines up with the crucial 200-day SMA.
On the other hand, price drops towards $1,770–1,765 may continue to draw some buyers. This should restrict the decline in Gold’s price to $1,755 in the foreseeable future. Failure to protect the support above levels might trigger technical selling and hasten the corrective fall towards the formerly strong horizontal resistance breakpoint, now turned support, between $1,734 and $1,732.