Gold’s price drops from a five-month high as the US Dollar somewhat recovers intraday. US Treasury bond rates are increasing, putting pressure on the XAU/USD and reviving USD demand.
Risks associated with the price of gold should be limited by bets on the Federal Reserve hiking rates less firmly. Gold’s price falls from the $1,810 area, or the five-month high hit earlier this Monday, failing to benefit from the intraday gain. The XAU/USD slips below $1,800 during the early part of the European session and is now perched on a potentially dangerous 200-day Simple Moving Average (SMA).
The slight US Dollar resurgence is putting pressure on the price of gold. Following an early dip, the US Dollar has only partially recovered from its lowest position since late June, which is anticipated to impact the price of gold denominated in US dollars. The US’s Friday release of solid monthly employment figures and a pleasant surprise in pay growth raised the possibility that inflationary pressures will increase further. This improves the position of the dollar and fuels speculation that the Federal Reserve will continue to tighten monetary policy.
The price of the XAU/USD pair is further hampered by rising US Treasury bond rates. The Federal Reserve’s chairman, Jerome Powell, also predicted that the peak interest rate would be higher than expected this week. Consequently, the price of US Treasury bonds rises throughout the day, which is seen as another factor supporting the US Dollar and pulling money away from the non-yielding Gold price. Further weighing on the XAU/USD is the recent optimism about easing COVID-19 restrictions in several Chinese cities, which has dampened demand for traditional safe-haven assets.
To limit losses, the Federal Reserve wagers on slower rate hikes. At its next meeting on December 13–14, the Federal Reserve is anticipated to increase interest rates by a relatively small 50 basis points, but the downside is anticipated to remain cushioned—at least briefly. In the event of any big corrective slump, this should continue to support the price of gold, requiring careful positioning. The US ISM Services PMI, announced later during the early North American session, is now being anticipated by traders for short-term possibilities.
Technical Gold Price Outlook
Technically, last week’s extended surge past the significant 200-day SMA was seen as a brand-new trigger for bullish traders. Thus, buyers are more likely to be drawn to the $1,783–$1,782 range in the case of a future slump. The price of gold should thus be limited in its upward movement to the support level that served as the horizontal resistance breakpoint between $1,761 and $1,760.
On the other hand, unless some follow-through buying happens beyond the $1,810 zone, bulls may want to delay placing further bets. The price of gold may then continue to increase, perhaps reaching the next significant obstacle on the road to the supply zone between $1,843 and $1,845 near the $1,830 region.