Key Talking Points:
- XAU/USD bullish bounce finds increased resistance
- Bond yields threaten further upside correction in gold prices
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Gold prices have stalled in the Asian session after a strong performance to begin the month of April. The strong upside stretch seems to have become exhausted and XAU/USD is struggling to overcome the $1,745 area where resistance has been found on several occasions over the last 3 weeks.
A modest uptick in US bond yields has seen the US Dollar find renewed support, which is causing XAU/USD to undo some of yesterday’s gains. The US Dollar basket has halted a weekly decline and it will be key to see whether upside momentum is able to hold, which would put further downside pressure on gold.
Biden’s spending plan and improving economic data are cementing this upbeat economic outlook in the US, which is putting further pressure on the commodity’s safe-haven appeal. Focus will be on today’s Fed meeting minutes where investors will be looking for any sign that the central bank will need to raise rates sooner than anticipated given stronger fundamentals. Bond yields will be key to the pricing dynamics of the US Dollar and therefore are likely to offer some trading momentum for XAU/USD.
US10Y, XAU/USD Daily Chart
Source: Refinitiv
Technical Outlook: XAU/USD registered a yearly low at 1,676 on the 8th of March, so this will be the area we will be looking out for as a sign for any further correction towards the 1,640 area. The recovery since then has seen an ascending trendline offer support until momentum turned bearish again on the 29th of March, and this same trendline seems to be offering short-term resistance as XAU/USD attempts to push higher.
A break above 1,745 is likely to see bulls regain control although further resistance is likely to be met around the 1,760 area where gains have stalled since the beginning of March. The break above a descending trendline since the start of 2021 should be supportive of XAU/USD in the short-term and I’ll be looking at 1,720 as immediate support if selling pressure continues to build. But if this area is taken out then a fall below 1,690 is likely to seem the retracement picking up steam.
XAU/USD Daily chart
Source: Refinitiv
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— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
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