XAU / USD soars higher on weaker USD, lack of bullish conviction
Update: Gold reversed an intraday decline in the $ 1,758 region and has now moved into positive territory for the third day in a row. The US dollar extended the previous day’s retracement decline from its highest level since August 23 and remained on the defensive during the first half of Tuesday’s trade action. This, in turn, was seen as a key factor that gave dollar-denominated commodities a slight boost, including gold. However, a combination of factors has prevented any significant rise and warrants some caution before positioning for any further appreciation.
The risk boost – illustrated by a strong rally in global equity markets – acted as a headwind for safe haven gold. This, along with expectations of an imminent Fed debt reduction announcement, triggered a further rise in US Treasury bond yields and further helped to cap the earnings of the unproductive yellow metal. Investors also seemed reluctant to place aggressive bets, instead preferring to wait for a new catalyst from the results of a two-day FOMC meeting starting on Tuesday. Therefore, it will be prudent to wait for a strong follow-up buy before confirming that XAU / USD has already hit a near-term low.
The Fed is expected to announce its decision on Wednesday and is expected to largely leave its monetary policy parameters unchanged. Therefore, investors will be looking for clues as to when the Fed will start to roll back its massive pandemic-era stimulus package. This will play a key role in influencing the price dynamics of the US dollar and give a new directional boost to gold.
Previous update: Gold price consolidates Monday’s rebound, as bulls become cautious as the two-day FOMC meeting approaches that begins later on Tuesday. Expectations of the Fed’s reduction plan remain high and dampen the mood of gold investors. Meanwhile, the easing of Evergrande’s fear in China led to improved risk sentiment, raising US Treasury yields at the expense of gold. However, gold buyers continue to find support from a widespread decline in the US dollar, thanks to the calm tone of the market.
Gold price interrupts its recovery mode after bulls encounter strong resistance near the $ 1,767- $ 1,768 region, as six-week lows to $ 1,742 continue to draw sellers to the amid hawkish Fed expectations and a light US record.
Read: Will the gold fall? Techniques to overcome the risks of Evergrande
Gold price: key levels to watch
The Technical Confluence Detector shows that the price of gold is struggling around a bunch of healthy resistance levels near $ 1762 to $ 1763. This level is the convergence of Fibonacci 23.6% a day and Fibonacci 23.6% a week.
Acceptance above the latter could call into question the highs of the range near $ 1,768 to $ 1,770, which is the intersection of the 38.2% Fibonacci one week and the SMA100 one hour.
Higher, the one-day SMA5 at $ 1,774 will test offers on the way to the rally.
One-month 61.8% Fibonacci at $ 1,778 would keep the rise further.
Alternatively, if the bulls fail to resist above the $ 1760 support, then a decline towards the confluence of the 38.2% Fibonacci one day and the Bollinger Band one hour lower at $ 1757 cannot be ruled out.
The 61.8% Fibonacci a day at $ 1752 could appear as minor support, below which the decline will open towards $ 1742 yesterday’s low and the Fibonacci 38.2% a month.
This is what it looks like on the tool
About the technical confluence detector
The TCD (Technical Confluences Detector) is a tool to locate and report price levels where there is congestion of indicators, moving averages, Fibonacci levels, pivot points, etc. If you are a short term trader, you will find the entry points for countertrend strategies and chase a few points at a time. If you are a medium to long term trader, this tool will allow you to know in advance the price levels where a medium to long term trend can stop and rest, where to unwind positions, or where to increase. your job size.