- The price of gold continues to decline as the DXY rises with yields amid an aggressive Fed.
- Focus shifts to US ISM Services PMI and Friday’s NFP.
- A break below the 100 DMA will drive gold towards the $ 1,785 levels.
The price of gold is losing another $ 20 in trading Thursday, due to the rally in US Treasury yields through the curve. Benchmark 10-year returns are above the 1.70% milestone
Wednesday’s FOMC minutes came as an optimistic surprise after it showed that Fed officials discussed the beginning of a reduction in global asset holdings this year. Fed minutes also revealed that officials are prepared for earlier and faster rate hikes to combat high inflation.
The Fed’s aggressive outlook boosted yields, in turn, boosting demand for the US dollar across the board. The greenback also remains supported by the risk market profile, as investors worry about the tightening of Fed tightening expectations and the contagion of the coronavirus.
It’s a win-win for the US dollar, which is likely to weigh on the dollar-sensitive price of gold. Bears may remain in control ahead of critical US economic releases, with ISM’s Services PMI releasing Thursday, while the Non-Farm Payroll report is released on Friday. In addition, it highlights the speech of the president of the Fed of Saint Louis, James Bullard, in search of new signals on the normalization plans of the central bank’s policies.
Gold Price Chart – Technical Outlook
Gold: Daily Chart
The daily chart for gold shows that the latest move down has removed all major support levels from the daily moving average (DMA) as the bears now attack the 100 DMA at $ 1,793.
A strong sell is expected on a firm break below the latter, opening floors for a test of the December 29 low of $ 1,789.
The next downside target is seen at the December 21 low of $ 1,785. This will emerge as a powerful support for the gold bulls.
The 14-day Relative Strength Index (RSI) has pierced the midline for the decline, pointing to more losses ahead.
Meanwhile, any recovery attempt will face a strong bid at $ 1,800, where the 21 and 200 DMAs converge.
Higher up, the bulls will retest support turned resistance at the 50 DMA at $ 1,805. Daily highs at $ 1,812 will protect from further spikes.
Gold: Technical levels
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