- A pullback in the US dollar pushes gold towards $1,680.
- The pullback offers XAU/USD bulls hope.
- The dollar remains firm ahead of the FOMC meeting.
After the University of Michigan report showed a decline in inflation expectations, the dollar and US yields retreated causing a rebound in gold that recovered from multi-month lows towards $1,680.
XAU/USD broke above $1,670 and rose to $1,680, hitting a new daily high. It still maintains a significant weekly loss and the lowest close since April 2020, but the rebound could favor a short-term reversal. Gold is facing a strong resistance zone between $1,680 and $1,695.
The main trend is down and gold is currently hovering around $1,673 where the 200 week Simple Moving Average is.
Gold’s sharp rebound came after the University of Michigan’s September flash report on consumer sentiment showed a decline in medium- and long-term inflation expectations. The main index went from 58.2 in August to 59.2 in September, below the market consensus of 60.
The report triggered a decline in Treasuries and also a weight in the USD that turned negative. DXY fell to 109.50 from 110.25. 2-year Treasury yields fell from the highest level since 2007 of 3.92% to 3.88%, and 10-year Treasury yields fell from 3.49% to 3.42%.
Gold benefited from a strong rebound. Silver also turned positive with XAG/USD rising towards $19.50. Silver is heading for a modest weekly gain.
Next week’s FOMC meeting is critical for gold prices. The central bank is expected to raise rates by 75 basis points and maintain a hawkish tone with inflation as the main concern; all the factors that have been supporting the dollar and keeping metals under pressure.
Technical levels
Source: Fx Street
