- Gold renews fortnight high amid risk-on mood, softer US dollar.
- DXY drops to fresh 12-day low despite challenges to market sentiment from Biden, China.
- Quad Summit, US data and FOMC Minutes will be crucial for fresh impulse.
- Gold Price Forecast: Can XAUUSD extend beyond 21-DMA amid firmer yields?
Gold (XAU/USD) prices rise to a fresh high in two weeks as the softer US dollar joins cautious optimism during the early Monday morning in Europe. That said, the commodity poked 21-DMA while refreshing the multi-day high around $1,859, around $1,855 by the press time.
Although Beijing prints record daily new covid cases and Shanghai braces for more activity restrictions at least till Tuesday, market sentiment improved on Monday as overall Mainland China covid numbers has been declining since the last week. It’s worth noting that the COVID-19 figures recently dropped to 869 from 898 prior on a daily closing basis.
Also positive for the market sentiment is the repeated Fedspeak and news from the South China Morning Post (SCMP), suggesting easier quarantine policies in Shanghai. Additionally, PBOC rate-cut and mixed US data are some other catalysts that underpin the risk-on mood, which in turn favor the gold buyers.
On the contrary, inflation fears join the monetary policy tightening and its negative implications on the growth figures weigh on the risk appetite, favoring the XAU/USD sellers in turn. It should be noted that the geopolitical tensions also keep gold bears hopeful as the risk-off mood leads traders towards the US dollar, due to the greenback’s safe-haven status.
Recently, US President Joe Biden renewed the Sino-American tussles as he shows readiness to defend Taiwan during the pre-Quad Summit meeting in Japan. Elsewhere, Germany marks ways in which it can go ahead with the EU oil embargo on Russian imports and weigh on the risk appetite. Also drowning the mood is the latest escalation of military actions in Mariupol.
Against this backdrop, the US Dollar Index (DXY) renews a two-week low around 102.55 while the S&P 500 Futures rise over 1.0% to 3,946 at the latest. Also portraying the risk-on mood is the US 10-year Treasury yields, up 4.8 basis points (bps) to 2.83% by the press time.
Moving on, gold prices remain on the road to recovery but the further upside hinges on multiple geopolitical and economic issues comprising the covid, Quad meeting and Minutes of the latest Federal Open Market Committee (FOMC).
Technical analysis
Gold remains firmer past the 200-DMA while extending the previous week’s upside break of a monthly descending trend line amid firmer RSI and bullish MACD signals.
The precious metal buyers presently attack the 21-DMA hurdle surrounding $1,860, a break of which will direct XAU/USD towards the 61.8% Fibonacci retracement of December 2021 to March 2022 upside, around $1,875.
However, a major challenge for gold buyers is to stay beyond March’s low near $1,890.
Alternatively, the 200-DMA and the previous resistance line, respectively around $1,838 and $1,830, could restrict the short-term downside of gold before the yearly horizontal support around $1,785 gains the market’s attention.
Gold: Daily chart
Trend: Further upside expected