Gold has recently experienced a retreat from a significant resistance level. US real yields are on the rise once again; The XAU/USD pair is now approaching a critical support point represented by the 200-day moving average.
The current outlook for XAU/USD is influenced by the resurgence of US real yields, driven by positive US economic data in recent days. In mid-August, gold rebounded strongly, finding support at both the 200-day moving average and the June low of 1890. This rebound coincided with a temporary decrease in US real yields, as the data released in the latter half of August failed to meet excessively optimistic expectations. It’s worth noting that the US Economic Surprise Index reached a two-year high at the end of July before moderating.
Gold’s Retreat- Us Yields- XAU/USD
The US Federal Reserve’s reluctance to commit to rate hikes has provided little incentive for yields to decline significantly, given the resilient state of the economy. Comments from Fed Governor Christopher Waller and Boston Fed President Susan Collins have underscored the central bank’s data-dependent approach to monetary policy. Thus, the prevailing trend for yields remains relatively stable or potentially upward.
US real yields remain near multi-month highs achieved in August. Rising nominal interest rates, along with reduced inflation expectations, have driven up real rates, increasing the opportunity cost of holding gold, which yields no interest. This situation has put pressure on the precious metal’s price.
From a technical perspective, gold saw a brief rebound from strong support in late August. But it has since retreated from crucial resistance levels. It is represented by the upper edge of the Ichimoku cloud on daily charts and the 89-day moving average. This recent decline has increased the likelihood of a bearish pattern. It is characterized by lower highs and lower lows, a trend that has persisted since May. To reverse this bearish pattern, gold would need to surpass at least last week’s high of 1952. In the short term, for a rebound to materialize, gold must maintain its crucial support level.
Failure to Hold?
Failure to hold this support level could lead to a retracement in gold’s price toward the vital support of the 200-day moving average. The lows of June and August, which range from 1885 to 1890. The significance of this support was highlighted in a previous analysis from August 13. A breach below this level might pave the way for a decline toward the February low of 1805. Most notably, breaking below the 1885-1890 range could disrupt the uptrend that began in 2022.