Friday, October 07, 2022

Gold Price Forecast: XAU/USD Retraces Towards $1,800 As US Dollar Tracks Strong Returns

Updates: Gold (XAU/USD) takes an offer to reverse the gains of the opening Asian session during early European morning on Tuesday, falling to $1,817.

The metal’s latest decline could be linked to the US dollar’s uptrend over the past two days, supported by strong US Treasury yields.

It is worth noting that US 10-year and 5-year Treasury yields refreshed two-year highs while 2-year bond coupons jumped to February 2020 levels at the latest. A 0.37% drop in S&P 500 futures as of press time also reflects a risk-off mood.

Behind the move could be market indecision on the Fed’s next move, which is considering FedSpeak and softer US data as well as Omicron concerns.

That said, the US NY Empire State Manufacturing Index and the NAHB Housing Market Index for January will decorate the calendar for the day, while next week’s Federal Open Market Committee (FOMC) meeting will turn crucial.

End of update.

Gold (XAU/USD) prices are trading near an intraday high of $1,820.31 during Tuesday’s Asian session.

The yellow metal marked a sluggish start to the week, marking a Doji candlestick on Monday after two days of declines. The trend reversal suggests the candlestick joins mixed concerns over the Fed’s next move and the South African COVID version, namely, Omicron, to ease the latest rise in gold prices.

In doing so, the riskier asset ignores the strong US Treasury yield by tracking the light bid of the S&P 500 futures.

That said, US 10-year and 5-year Treasury yields rose to their highest in two years, while the 2-year coupon reached February 2020 levels during the start of the week. On the other hand, as of press time, the S&P 500 Futures is up 0.12% intraday.

US Treasury yields react to the latest scathing remarks from Federal Reserve Bank of San Francisco Chair Mary Daly and New York Fed Chair John Williams, published Friday ahead of next week’s Federal Open Market Committee (FOMC) meeting. In doing so, bond coupons pay little attention to the soft prints of US retail sales for December and the Michigan Consumer Sentiment Index for January.

It should be noted that Omicron concerns flash mixed signals with rising cases in China and Japan indicating more virus-led activity restrictions, while market players in the West have softened numbers. It should be noted that Tokyo and 10 other Japanese prefectures are in danger of a semi-emergency, while China’s Tianjin has threatened to halt all foreign fairs due to COVID.

Elsewhere, North Korea’s missile tests and the Sino-US conflict also challenge market sentiment but fail of late.

Looking ahead, the Bank of Japan’s (BOJ) monetary policy and UK jobs report will be joined by updates relating to Omicron and suggesting a possible rate cut in China, not to forget talks of the Fed’s next steps, To guide short-term market moves.

technical analysis

Monday’s Doji candlestick joined a strong RSI and bullish MACD signals to keep gold buyers optimistic during Tuesday’s Asian session.

However, a clear upside break of the November-December 2021 61.8% Fibonacci retracement (Fibo.) level, around $1,830, becomes necessary for gold buyers to retake control. It is worth noting that the top marked during July and September, around $1,834, acts as a validation point for further rally of the commodity.

After that, the run-up could target several lows marked around $1,877 during mid-November before the challenging latest 2021 peak around $1,850.

Alternatively, pullback moves can be targeted at 50% and 38.2% Fibo. levels near the $1,815 and $1,800 range, respectively.

However, the convergence of the 100-DMA and the rising support line from December 15, around $1,793, becomes a strong support for gold sellers to watch later.

Overall, gold buyers are looking for a short-term major hurdle to the north, supported by strong oscillators and candlestick formation.

Gold: Daily Chart

Gold Price Forecast: XAU/USD Retraces Towards $1,800 As US Dollar Tracks Strong Returns

Trend: Expected to move forward


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