- A combination of factors drove the aggressive selling of gold on Monday.
- The prevailing risk appetite acted like a headwind for gold – safe haven.
- Rising US bond yields and resurgent demand for USD contributed to intraday selling.
The oro witnessed aggressive selling on the first trading day of the new year and halted a nearly three-week uptrend around the $ 1,830-32 bargain zone, or the highest level since November 22. Intraday selling pressure accelerated early during the US session and dragged gold prices to a new daily low, around the $ 1,805 zone in the last hour.
Signs that the Omicron variant could be less severe than feared and unlikely to derail the economic recovery overshadowed concerns about the continued rise in new COVID-19 cases. The optimism was evident from an extension of the recent bull run in equity markets, which was seen as a key factor acting as a headwind for safe-haven gold.
Meanwhile, risk appetite, coupled with the Fed’s aggressive outlook, sparked new momentum in US Treasury yields and further pushed out flows of the underperforming yellow metal. In fact, the benchmark 10-year US government bond yield ended 2021 with the biggest increase since 2013 and soared to return near 1.58%, or month-long highs on Monday.
With the last leg down, the XAU / USD has now reversed the positive move from last week and a subsequent drop below $ 1,800 will set the stage for further losses. That said, traders could refrain from aggressive bets amid quiet Christmas trading and ahead of the major US macro data scheduled for the start of a new month.
technical perspective
From a technical perspective, a sustained break below $ 1,800 could spark some technical selling and make the XAU / USD vulnerable to further declining. The downward trajectory could drag the pair’s prices further towards the horizontal zone of $ 1,785 en route to the next relevant support near the region of $ 1,770 and the December low, around the zone of $ 1,753.
On the other hand, the $ 1,830-32 zone should continue to act as a key barrier, which if decisively removed should push gold prices towards the $ 1,850 zone. The upward trajectory could extend further towards the November 2021 high, around $ 1,877 with some intermediate hurdle near the $ 1,870 zone.
Daily chart
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