- XAU / USD is going down at the beginning of the week.
- Gold could extend the downward correction to $ 1,760 in the short term.
- The 20-day SMA forms the first technical hurdle at $ 1,790.
The XAU / USD staged an impressive rebound in the second half of the prior week and managed to close in positive territory. The risk averse market environment on Monday, however, made it difficult for the pair to preserve its bullish momentum. At time of writing, gold is down 0.45% daily at $ 1,771.
Disappointing US consumer confidence data triggered a dollar sell-off on Friday and XAU / USD rose more than 1.5%. In addition, a 5.8% drop in the 10-year US Treasury yield was observed, putting additional weight on the shoulders of the greenback. On Monday, the yield on the 10-year US Treasury remained flat for the day at 1.2830, helping the dollar to remain resilient against its rivals.
Meanwhile, weaker-than-expected retail sales and industrial production data from China appear to be hurting market sentiment earlier in the week. Reflecting the risk-off environment, S&P and Nasdaq futures are down 0.3% ahead of Wall Street’s opening bell.
Later in the day, the Federal Reserve Bank of New York’s Empire Manufacturing Index, which is expected to decline to 29 in August from 43, will be the only data presented in the US economic record. However, investors are likely to stay focused on the perception of risk for the remainder of the day. Wednesday’s FOMC Minutes will be the next big thing in the market.
“The FOMC minutes are likely to determine the next short-term direction for gold as an upbeat report may knock gold down once again,” OCBC analysts noted. “From now until the report, we expect the bullish momentum in gold to carry it towards the $ 1,800 resistance.”
Technical prospects for gold
Despite Friday’s decisive rise, the Relative Strength Index (RSI) indicator on the daily chart appears to have started to decline before breaking above 50, suggesting that buyers are struggling to stay in control. On the upside, initial resistance is at $ 1,790 (20-day SMA) before reaching $ 1,800 (psychological level, 50-day SMA) and $ 1,805 (100-day SMA and 20-week SMA).
On the other hand, the downward correction could extend to $ 1,760 (static level). A daily close below that level could open the door for further losses towards $ 1,750 (static, June 29 low) and $ 1,740 (100-week SMA).
Additional levels
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