- Gold regains positive traction on Wednesday amid escalating tensions between the US and China over Taiwan.
- The appearance of new sales around the dollar turns out to be another factor that lends support to the yellow metal.
- Aggressive comments from several Fed officials the day before prevent a rally in XAU/USD.
The Prayed It attracts some buying near the $1,755 area on Wednesday and halts the previous day’s sharp pullback from a four-week high. XAU/USD maintains its buying tone during the first half of the European session and is currently trading around the $1,766 area, just below the daily high.
The rising geopolitical tensions caused by the visit of the president of the US House of Representatives, Nancy Pelosi, to Taiwan turns out to be a key factor that offers support for gold as a safe haven. China condemned the highest-profile US trip to Taiwan in 25 years and responded with a series of military exercises, announcing the suspension of various imports from Taiwan.
The intraday rally is seen supported by the appearance of some selling around the US dollar, which tends to benefit the price of gold, denominated in dollars. A mixed tone around US Treasury yields is not helping the dollar capitalize on the previous day’s rebound from a multi-week low, though expectations for further Fed rate hikes help limit the losses.
In fact, several Fed officials were very aggressive on Tuesday and hinted that further hikes in short-term interest rates are on the way. Markets were quick to react, helping US Treasury yields recover quickly from the lowest level since April. This is preventing the bulls from opening aggressive positions on gold with no yield.
In addition, investors seem reluctant and prefer to wait for a new catalyst before positioning themselves for the resumption of the recent recovery from the $1,680 zone, or a 15-month low hit in July. Market attention will therefore continue to be focused on Friday’s release of the US monthly NFP employment report.
The data will play a key role in influencing short-term dollar price dynamics and help determine the next directional move for gold. Meanwhile, the US ISM Services PMI will be released on Wednesday. This coupled with US bond yields could boost demand around the dollar and provide some momentum.
gold technical levels
Source: Fx Street
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