Gold prices extended their recovery into Asian trading on Tuesday, rebounding by half of the previous week’s losses. The market remains focused on upcoming speeches by U.S. Federal Reserve (Fed) officials and ongoing geopolitical tensions, particularly between Russia and Ukraine.
Gold Price Gains on Lower U.S. Treasury Yields
Gold has remained steady for the second consecutive day, buoyed by a recent pullback in U.S. Treasury bond yields, which has led to a weakening of the U.S. Dollar (USD) against its major counterparts.
U.S. bond yields have entered a correction phase as investors express concern over the potential fiscal and trade policies that could be introduced by U.S. President-elect Donald Trump, which may affect the economic and inflation outlook.
In addition, gold is benefiting from the intensifying geopolitical tensions between Russia and Ukraine. U.S. President Joe Biden’s decision to authorize Ukraine to use American Army Tactical Missile Systems (ATACMS) to strike inside Russia has escalated the conflict. This move came after Moscow deployed North Korean troops to supplement its own forces, adding further pressure to the situation.
Geopolitical and Economic Factors Boost Gold
Expectations of additional stimulus measures from China also support the precious metal. As the world’s largest consumer of gold, any economic stimulus from China is seen as favorable for gold prices. Market participants are also anticipating potential cuts to China’s Reserve Requirement Ratio (RRR) this year, which could provide further support to the metal.
However, it remains uncertain whether gold can maintain its recovery momentum. Traders are awaiting more guidance on the Fed’s interest rate outlook, with central bank talks scheduled for later this week. Market sentiment could shift depending on the tone of these discussions, which may influence the USD and, in turn, the price of gold.
Technical Outlook: Resistance at $2,655
From a technical perspective, gold remains in a “sell on bounce” phase as long as the 14-day Relative Strength Index (RSI) remains below the 50 mark, currently hovering near 45. The immediate resistance for gold is at the psychological level of $2,630. A stronger barrier lies at the 50-day Simple Moving Average (SMA) at $2,655.
Sustaining a break above $2,655 would be crucial for maintaining the recovery, which has already seen gold prices rebound from two-month lows near $2,537. If the price clears this resistance, the next key target would be $2,687, where the 21-day SMA resides.
On the other hand, failing to secure a daily close above the 50-day SMA could reignite bearish sentiment, pushing prices back toward the $2,600 level. Further declines may bring attention to the support zone at $2,551, where the 100-day SMA aligns with the September 18 low.
A decisive break below this level would likely trigger a fresh downtrend, with the next support seen at $2,500, followed by the September 4 low at $2,472.
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