Gold (XAU/USD) prices seem all-set to print the first weekly loss in three, refreshing intraday low near $1,813 heading into Thursday’s European session.
Broad risk-off mood joins stronger US dollar to drown the gold prices after Wednesday’s Federal Open Market Committee (FOMC) meeting. Adding to the sour sentiment are concerns over China’s Evergrande and Russia that exert additional downside pressure on the riskier assets like commodities and equities.
The US Federal Reserve (Fed) matched wide market forecasts while keeping the benchmark interest rates and tapering targets intact. However, the interesting part from the Monetary Policy Statement was, “The Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”
Fed Chair Jerome Powell sounded a bit cautiously optimistic as he said, “The rate-hike path would depend on incoming data and noted that it is ‘impossible’ to predict.” Though, Powell’s comments like, “There’s plenty of room to raise rates,” seemed to propel the faster rate hike concerning and propelled the US dollar, which in turn drowned gold prices from the yearly resistance.
Additionally, China’s Evergrande said it is targeting a restructuring proposal within six months while the US State Department warned Russia over Nordstorm 2 oil pipeline if it invades Ukraine. It should be observed that escalating virus numbers in Japan also weigh on the market sentiment due to the nation’s key status in the global bond markets.
Against this backdrop, the US 10-year Treasury yields seesaw around 1.85%, mildly offered after positing the biggest daily gains in three weeks. However, stock futures in the US and Europe print over 1.0% intraday losses by the press time.
That said, gold prices are likely to extend the immediate downside as technical breakdown joins the fundamental cause. However, today’s US Q4 GDP and Durable Goods Orders for December will be important for the short-term direction.
Gold extends downside break of a three-week-old rising trend channel amid bearish MACD signals, suggesting further downside of the yellow metal. However, RSI conditions are oversold and challenge bulls.
Hence, the immediate support of 200-SMA, near $1,810 by the press time, may trigger the quote’s corrective pullback. Also acting as the short-term key support is an ascending trend line from December 15, near $1,809.
That said, failures to bounce off $1,809 could quickly drag gold prices to the $1,800 threshold and then towards the monthly low of $1,782.
Meanwhile, recovery moves remain elusive below the channel’s lower line, around $1,827.
Following that, the 50-SMA and the recent highs, respectively around $1,831 and $1,853, will be in focus.
Gold: Four-hour chart
It’s worth noting that a death-cross on the daily chart, a condition where 50-DMA crossed 200-DMA to the downside, hints at the bullion’s further weakness. Additionally, buyers’ rejection from the yearly resistance line, around $1,846 at the latest, also favors gold bears.
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Gold: Daily chart