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Gold has perked up on the day following an offer in the US dollar and a bid in global shares. US real yields are the focus pertaining to Federal Reserve expectations.
The precious metal has benefitted due to the market being well priced for a hawkish Fed in what has recently turned into risk-on market conditions.
Gold could begin to lose steam so long as Fed expectations remain as status quo. In this sense, omicron fears and their potential impact on the economy will be a key focus in the near-term, and we would likely need to see economic weakness generate doubts that the Fed will be able to deliver on their hawkish stance for the yellow metal to maintain the recent momentum.’
Gold (XAU/USD) edged higher during the New York session, trading at USD 1,791.63. The market sentiment is positive, though US equity indices fluctuate between gainers and losers. Additionally, the US dollar weakened across the board, while US Treasury bond yields, with the 10-year benchmark note, retreats after testing the 1.50% threshold in the overnight session.
Factors like investors assessing the economic impact of the Omicron variant and the delay of the US President Joe Biden Build Back Better agenda dented market participants’ mood.
The US Dollar Index, which measures the US dollar’s value against a basket of six currencies, edges lower 0.27%, down to 96.25. Furthermore, as previously mentioned, the 10-year Treasury yield is down some three basis points, at 1.457%, from 1.487% reached on Tuesday’s session.
Before Wall Street opened, the US economic docket featured one of the last waves of data of 2021. The US Bureau of Economic Analysis reported that the US economy in the third-quarters grew at an annualized pace of 2.3%, higher than the 2.1% estimated. Moreover, the Personal Consumption Expenditures Prices rose by 5.3%, according to expectations.
In the overnight session, gold remained subdued in a narrow range, between USD 1,785-USD 1,795. In the mid-European session, the non-yielding metal trended up, though faced strong resistance at the 100-hour simple moving average (SMA), retreating at press time to current levels. That said, unless XAU/USD decisively breaks above USD 1,793, the precious metal would remain bearish biased.
The XAU/USD daily chart depicts indecision, as shown by the daily moving averages (DMAs) almost “horizontally” contained in the USD 1,787-USD 1,800 range. From a market structure perspective, unless gold bulls reclaim USD 1,792.95, the bias is bearish, though to resume the trend, USD bulls would need a daily close below the December 16 pivot low at USD 1,775.40.
On the way south, the first support would be the December 16 low at USD 1,775.40. A break beneath that level would exert downward pressure on the precious metal, exposing crucial support areas. The next one would be the December 2 low at USD 1,761.72, followed by the December 15 cycle low at USD 1,752.44
To the upside, the first resistance would be the December 8 cycle high at USD 1,792.95. A clear break of that level would immediately expose USD 1,800, followed by the September 3 swing high at USD 1,834.
