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* Gold is breaking higher towards $1800, as USD sell-off resumes.

* The US Treasury yields remain depressed amid dovish Fed bets.

* XAU/USD’s technical indicators point to more upside.

 

Gold (XAU/USD) is extending its three-day upbeat momentum into Monday, as the bulls clinch fresh two-month highs near $1790, fast approaching the $1800 mark.

 

The acceleration of the selling pressure in the US dollar in the European morning fuelled another leg up in the yellow metal. The US dollar index tumbles to fresh seven-week lows of 91.17, down 0.40% on the day.

 

The greenback remains heavily offered across the board, thanks to the risk-on market mood, spurred by optimism over higher vaccination rates in Europe, the UK and the US. Successful vaccine rollouts suggest a faster global economic recovery, weighing down on the safe-haven dollar.

 

Further, the weakness in the US Treasury yields, in the wake of dovish Fed expectations, also collaborates with the bearish tone in the buck.

 

The precious metal also draws support from the reports that China has granted permission to its domestic and international banks to import large amounts of gold into the country. Additionally, a favorable technical setup also backs the renewed uptick in gold.

 

Looking ahead, the US dollar price action and broad market sentiment will lead the way for gold traders, especially, in absence of relevant economic news from the US.

 

Looking at the chart, gold is playing out as it should be on the break above resistance at $1,755 and since then, there isn't much turning back as price continues to look towards $1,800 and the 100-day moving average (red line) - now seen @ ~$1,804.

 

That said, as much as gold is playing out as it should from a technical perspective, it is tough to see gains sustain in the bigger picture as ETF holdings are still being trimmed.

 

ETF holdings were shed for a fifth straight session, keeping at its lowest level since 20 May last year and it may very well be a matter of time before gold starts playing catch up to that if investor appetite doesn't improve as we get towards the latter stages of April.

 

·         U.S. gold futures were steady at $1,780.10 per ounce. “At the moment, the combination of a weaker U.S. dollar and easing interest rates is supportive for gold, despite better economic outlook,” said Michael McCarthy, chief market strategist at CMC Markets.

 

“We’ve got the momentum. But of course we are at a very important point having just got through that $1,765 level. While we hold above the $1,765 level, the outlook for gold is positive in the short term.”

 

·         Gold continues to react to movements in US Treasury bond yields

“On Tuesday, the labour market report from the UK will be looked upon for fresh catalysts. Although this event is unlikely to have a direct impact on gold’s valuation, a sharp movement in the GBP/USD pair could drive the USD’s overall market performance.”

 

“On Thursday, the European Central Bank will announce its Interest Rate Decision and release the Monetary Policy Statement. Investors are not expecting any changes to policy but the bank could provide forward guidance with regards to changes in asset purchases. A dovish policy outlook is likely to weigh on the shared currency and ramp up the demand for the USD.”

 

“Finally, the IHS Markit will release the preliminary April Manufacturing and Services PMI reports for the euro area, Germany, the UK and the US. Market participants are likely to ignore the headline figure and focus on the underlying details that can reveal fresh insights with respect to input price constraints. Meanwhile, investors will continue to keep a close eye on yields.”

 

“A daily close above $1,785 (Fibonacci 38.2% retracement of the January-March downtrend) could open the door for additional gains toward $1,800 (psychological level) and $1,805 (100-day SMA).”

 

“The initial support is located at $1,755 (static level, 50-day SMA) ahead of $1,745 (former resistance) and $1,735 (20-day SMA). At the current technical setup, only a daily close below $1,755 could be seen as an attractive development for sellers.”

 

Reference: CNBC, FXStreete, ForexLive