Gold prices (XAU/USD) are currently consolidating their gains from the past two days, remaining within a narrow trading band below the weekly high reached on Thursday. Factors such as rebounding US bond yields and a positive risk tone are acting as headwinds for the precious metal. Despite these challenges, the Federal Reserve’s dovish stance and continued weakness in the US dollar are providing support to gold.
Highlights:
- Gold prices are currently consolidating below weekly highs, encountering resistance from rebounding US bond yields
- The Federal Reserve’s dovish stance and a persistently weak US dollar are key factors providing crucial support for gold amid challenging market conditions.
- Technical indicators, including the 14-day Relative Strength Index (RSI), suggest a bullish potential for gold, contingent on the metal defending the critical short-term 21-day Simple Moving Average (SMA) at $2,015.
- The global focus remains on economic data, with the market closely watching US and Eurozone PMI releases for insights into the state of the global economy. Market dynamics continue to be influenced by central bank policies and overall risk sentiment.
Read more: Gold Surges Past $2,000 as Federal Reserve Signals Strong 2024 Rate Cuts
(XAU/USD) Technical Analysis
Source: Trading Compass
After surpassing the key $2,040-$2,050 supply zone on Wednesday, gold struggled to maintain a closing position above the latter on Thursday. The 14-day Relative Strength Index (RSI) indicator is still above the midline, suggesting bullish potential as long as gold defends the critical short-term 21-day Simple Moving Average (SMA) at $2,015. A sustained break below this level could lead to a test of the $2,000 threshold, with further support at the 50-day SMA around $1,980. On the upside, a daily close above the $2,040-$2,050 region is crucial for additional recovery towards the psychological level of $2,100.
Fundamental Overview
Gold (XAU/USD) is poised to register a weekly advance, rebounding from the previous week’s sharp pullback from all-time highs of $2,144. The current Asian trend in gold prices is influenced by a pause in the US dollar sell-off, as US Treasury bond yields attempt a modest rebound. The US dollar is finding support, and Asian stocks are paring early gains ahead of the release of preliminary PMI data from the US and the Eurozone, providing insights into the global economy.
The US dollar has been impacted by the Federal Reserve’s dovish pivot, with Chair Jerome Powell confirming expectations of interest rate cuts in 2024. In contrast, the Bank of England (BoE) and the European Central Bank (ECB) have left room for further tightening while emphasizing that rates will stay ‘higher for longer.’ The US dollar faced pressure due to the divergence in monetary policies, although a temporary respite came from unexpected rises in US Retail Sales data and falling Jobless Claims. However, the dovish Fed outlook continued to fuel a global risk-on rally, keeping gold prices elevated around eight-day highs of $2,048.
Looking ahead, the release of global PMI data will likely impact trading, with end-of-week flows and profit-taking remaining in play, especially after a week dominated by central bank-related volatility comes to an end.
Read more: Gold Price Dips: Eyes on Crucial US Data and Fed
Conclusion
Gold prices (XAU/USD) are consolidating below weekly highs amid challenges from rebounding US bond yields. While facing resistance, the Federal Reserve’s dovish stance and a weak US dollar provide crucial support. Technical indicators suggest a bullish outlook if gold maintains above the $2,015 level. The global focus remains on economic data, and market dynamics may continue to be influenced by central bank policies and risk sentiment in the near term.
