- Gold gets strong continuation traction and rallies to a three-week high on Tuesday.
- The decline in US bond yields weighs on the dollar and offers support to the yellow metal.
- Bulls ignore risk appetite, although hawkish Fed expectations could limit XAU/USD gains.
The Prayed is extending momentum after the previous day’s break through the $1,680-$1,685 resistance zone and building its recovery from the lowest level since April 2020. The strong positive continuation move lifts XAU/USD to a three-week high, around the $1,710 region during the first half of the European session on Tuesday.
The US dollar falls further from a two-decade high reached last week and is proving to be a key factor benefiting the precious metal, denominated in dollars. The Bank of England’s willingness to buy up to £5bn in long-term Gilts US bond yields move away from a multi-year high and continue to weigh on the dollar.
Apart of this, growing concerns about a deeper economic downturn in the US and Europe offer additional support to safe-haven gold. Fears were fueled by disappointing US data on Monday, which showed manufacturing activity grew marginally in September, at its slowest pace in nearly two-and-a-half years.
This largely helps offset risk-on sentiment and does not dent the prevailing bullish sentiment around gold. Having said that, prospects of more aggressive monetary policy tightening by major central banks could act as a headwind for the yellow metalwhich offers no returns, and limit any further gains, at least for now.
market participants now await monthly US employment data., whose publication is scheduled for Friday. The popularly known NFP report will play a key role in influencing the Fed’s future rate hike path. This, in turn, should help investors determine the next directional move for the dollar and gold.
Meanwhile, Tuesday’s US economic docket includes JOLTS job openings data and factory orders. This coupled with speeches from FOMC members and US bond yields will boost dollar demand and give XAU/USD a boost. Traders will also take into account the broader risk sentiment to take advantage of some short-term opportunities around gold.
gold technical levels
Source: Fx Street
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