Gold Regains Strength: Why $1,803 is The Key For More Upsides
Gold Regains, Happy Friday, traders. Gold is trading with a slight bullish bias at 1,797 level heading towards the 1,802 mark. Yesterday, XAU/USD closed at $1792.40 after hitting a high of $1795.30 and a low of $1787.75.
Gold broke its five-day bearish streak and turned positive on Thursday due to the declining price of the US dollar in the absence of American traders as there was a US bank holiday amid Thanksgiving. The US Dollar; Index broke its four-day bullish streak on Thursday, falling as low as 96.65, while the US Treasury Yield on the benchmark 10-year note fell to 1.59%, putting additional pressure on the US dollar and helping; gold remain positive overall.
Inflation fears have fueled speculation that the Federal Reserve will accelerate monetary tightening to cool rising prices and provide some support for; the yellow metal. However, there were still expectations of high inflation figures; which kept some recovery potential; for gold and broke its five-day bearish streak. However, gains remained muted as the Fed pursued its ongoing tapering, which would raise real rates. The opportunity cost of gold rises after an interest rate hike because it raises bond yields, despite the commodity being; considered a hedge against rising inflation.
Gold Regains, A growing number of Fed policymakers have indicated that the end of the Fed’s bond-buying program will be accelerated if high inflation persists and that interest rates will be raised more quickly. On Wednesday, the minutes of the Federal Reserve meeting were released, which showed that the bank was in favor of speeding up the process of asset tapering. This should have added selling pressure on gold, but the precious metal held its ground and kept gaining traction on the back of high inflation expectations.
Furthermore, some of the gains in precious metals could also be attributed to the news that suggested discovering a new variant of the coronavirus in South Africa. On Thursday, a scientist from South Africa expressed concern about a new COVID-19 variant that was detected in small numbers. They were working to understand its potential implications.
According to South African Health Minister Joe Phaahla, the variant was behind an exponential increase in COVID infections as it evaded the body’s immune response and was more transmissible than other variants. This news raised concerns about this variant spreading and raised safe-haven bets for gold, which pushed its prices higher on Thursday.
Daily Technical Levels
Pivot Point: 1791.82
Gold Technical Outlook – XAU/USD to Face Resistance at $1,803
The oversold Gold has recovered above 1,782 support level; heading towards a 23.6% Fibonacci retracement level at $1,802. A surge in buying pressure can help gold slice through a crucial hurdle at 1,803; leading its price to $1,815 and $1,830.
On the flip side, the violation of $1,782 level can trigger a sell-off until 1,760 support level. The RSI is holding above 50, demonstrating a bullish reversal in gold. Thus; consider taking a buy trade over $1,791 level to target; $1,803. Good luck!