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·         Gold Price Analysis: XAU/USD climbs back above $1740 level, upside seems limited

 

Gold edged higher in the last hour and refreshed daily tops, around the $1743-44 region heading into the European session.

 

Following an early dip to levels just below the $1730 level, the precious metal managed to regain some positive traction and has now recovered the previous day's modest losses. The prevalent cautious mood around the equity markets was seen as one of the key factors that extended some support to the safe-haven XAU/USD.

 

The overnight sell-off in the US fixed income market and a slump in crude oil prices took their toll on the global risk sentiment. This, in turn, forced investors to take refuge in traditional safe-haven assets, including gold. Apart from this, a subdued US dollar demand further benefitted the dollar-denominated commodity.

 

The USD bulls moved on the sidelines amid a modest pullback in the US Treasury bond yields, which provided an additional boost to the non-yielding yellow metal. That said, the optimistic outlook for the US economy might continue to underpin the greenback and keep a lid on any meaningful upside for the XAU/USD.

 

The Fed added to the narrative of a relatively faster US economic recovery and predicted a V-shaped recovery this year. Moreover, policymakers did not show any discomfort from the recent surge in long-term borrowing cost. This should act as a tailwind for the US bond yields and continue lending some support to the USD.

 

Even from a technical perspective, repeated failures near the $1760-65 horizontal support breakpoint, now turned resistance warrants caution before positioning for any further appreciating move. Hence, any subsequent positive move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

 

·         Gold Price Prediction: Sideways Trading Continues, Brace for Breakout!

The precious metal GOLD prices closed at 1732.50 after placing a high of 17554.20 and a low of 1716.60. Gold prices tried to break the bearish momentum on Thursday but failed to do so and continued their bullish streak for the third consecutive session. Prices were mixed on Thursday as they rose in the first half of the day and declined in the second half. The decline in the yellow metal was caused by the strength of the US dollar that was triggered by the recent hike in the US Treasury bond yields.

 

The 10-year US treasury note yield rose and reached its 13-month highest level above 1.7% on Thursday. The rising Treasury yields have been bad news for gold lately, and the investors were hopeful that Powell would give any hint of the Central Bank buying more bonds to cap the rising yields as they have been limiting the rally in risk assets. However, Fed Chair Jerome Powell declined to comment on the issue and added in the rising trend of yields that ultimately added further pressure on the yellow metal prices. Gold has been used as a hedge against inflation worries for about decades. Still, in recent months, the investors at Wall Street have been deliberately cautious and investing in Treasury yields and the US dollar instead of the precious metal against rising inflation worries.

 

On the other hand, the US dollar Index that tends to decline in heightened inflation fears was also rising in recent months. The greenback’s status as a reserve currency has encouraged its standing as a safe-haven and investors have started using it as a store of value that has pushed its price to 92 level. The strength of the US dollar kept the pressure intact on the prices of yellow metal on Thursday.

 

On the data front, at 17:30 GMT, the Philly Fed Manufacturing Index rose to 51.8 against the expected 22.5 and supported the US dollar, weighing on the yellow metal prices. The Unemployment Claims from the last week also rose to 770K against the expected 704K and weighed on the US dollar, capping further downward pressure on gold. At 19:00 GMT, the CB Leading Index declined to 0.2% against the forecast 0.3% and weighed on the US dollar and limited the losses in prices.Meanwhile, on Thursday, Fed Chair Jerome Powell said that the coronavirus pandemic had highlighted the need to advance systems for transferring money across international borders. The desire for improvement and digitalization has been accelerated for the less efficient areas of the current payment system after the coronavirus pandemic. Powell added that it has become crucial to integrate potential central bank digital currencies into the existing payment system alongside cash and other forms of money. He said that the pandemic crisis had underscored the limitation of current arrangements for cross-border payments and a need to add digital currencies to the system. Although the current money system was safe and reliable, it suffers from outdated technology.

Daily Technical Levels

Support Resistance

1714.66 1752.26

1696.83 1772.03

1677.06 1789.86

Pivot point: 1734.43

GOLD is trading with a bearish bias, having dropped to $1,733 level. It is now gaining support around the 1,720 mark along with a resistance level of 1,740. The MACD and RSI support a selling trend now, whereas the 20 & 50 periods EMA are also suggesting a selling bias. On the two-hourly timeframes, the precious metal is gaining support at 1,728 levels extended by an upward trendline. Gold can exhibit choppy trading within a trading range of 1,720 – 1,740 today. Good luck!

 

·         GOLD TECHNICAL ANALYSIS

 

Gold prices turned lower after testing the ceiling of a bullish Falling Wedge chart pattern. If XAU/USD continues to trade within the confines of this technical pattern, we may see the precious metal aim back towards the 1658 – 1678 support zone for another chance to bounce back up. Otherwise, breaching the range may open the door to deeper losses. Pushing above the wedge exposes the 50-day SMA.

 

Reference: FXStreet, DailyFX, FXLeaders