- Gold saw new sales for the third day in a row and fell further from multi-month highs.
- Aggressive expectations from the Fed, high US bond yields and a stronger USD weighed on the metal.
- The new nerves of COVID-19 could help limit losses and warrant caution from aggressive bearish traders.
The oro it extended last week’s retracement slide from the $ 1,877 zone, or five-month highs, and lost additional ground for the third day in a row on Monday. The XAU/USD It continued to fall during the early days of the American session and fell to fresh two-week lows around the $ 1,830 zone in the last hour. US government bonds saw new sales amid growing market acceptance that the Fed will have to act more decisively to curb inflation. In fact, the yield on the two-year US Treasury, which is highly sensitive to interest rate expectations, remained stable near the highest level since March 2020. This turned out to be a key factor that it drove the flows away from the non-performing yellow metal.
Meanwhile, aggressive expectations from the Fed, coupled with rising US bond yields, continued to act as a tailwind for the US dollar. This, coupled with a generally positive tone in equity markets, also acted as a headwind for dollar-denominated commodities, including gold. That said, concerns about the economic fallout from the new COVID-19 restrictions in Europe could benefit the precious metal’s safe-haven status and help limit deeper losses. Austria said it would be the first Western European country to re-impose a total lockdown to tackle rising infections, while Germany warned it could do the same. This, in turn, warrants some caution for aggressive bearish traders.
The US Economic Agenda features the only Existing Home Sales release and it is unlikely to provide a significant boost to gold prices. This could further deter traders from making new directional bets ahead of this week’s key macroeconomic releases in the US: Tuesday’s PMI flash numbers, preliminary third-quarter GDP (second estimate), orders for Durable goods and the underlying PCE price index for Wednesday. Aside from this, the minutes from Wednesday’s FOMC monetary policy meeting will play a key role in influencing short-term USD price dynamics and provide a fresh boost to the commodity. Therefore, it will be prudent to wait for a strong follow-up sell before confirming that the metal has already peaked and positioning yourself for a deeper corrective pullback.
technical perspective
Even from a technical perspective, the XAU / USD, so far, has managed to hold its neck above the strong horizontal resistance break point at $ 1.834-32. The aforementioned hurdle turned into support should act as a key point for traders, which if decisively broken could lead to some technical selling. Gold could then accelerate the decline to test the next relevant support near the $ 1,810-08 region before finally dropping to the round $ 1,800 level.
On the other hand, the $ 1,848-50 area now appears to have emerged as a strong immediate resistance. Some subsequent purchases have the potential to push XAU / USD prices past the intermediate hurdle of $ 1,863-65, to test a multi-month high of $ 1,877 touched last Tuesday.
Additional technical levels
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