On Thursday, XAU/USD is making a big comeback.
Gold appears to be supported by falling US Treasury bond yields.
Above 92.40, the US Dollar Index renews multi-month highs.
Gold managed to launch a strong recovery on Wednesday after plunging to its lowest level since mid-April at $1,750 on Tuesday, and was last seen recovering 0.65 percent on a daily basis at $1,772.
Despite broad-based USD gains, the XAU/USD pair had no trouble moving higher during American trading hours, thanks to a strong drop in US Treasury bond yields, which helped gold attract investors. The benchmark 10-year US T-bond yield is currently at 1.446 percent, down over 2% on the day.
Profit-taking may have also been spurred by quarter-end flows and rebalancing of huge positions, allowing the XAU/USD to retrace a chunk of this week’s loss.
Meanwhile, the Automatic Data Processing (ADP) Research Institute reported on Wednesday that private sector employment in the United States climbed by 692,000 in June. This number was higher than the market’s expectation of 600,000, giving the dollar a lift ahead of Friday’s Nonfarm Payrolls data. The US Dollar Index, which measures the performance of the US dollar against a basket of six major currencies, was last seen trading at 92.41, its highest level in almost two months.
Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, has provided an analysis stating that gold remains offered below $1,790 and looks to retreat to the crucial support level of $1,735.
“As long as we’re above that, we’ll keep our longer-term upward bias,” Jones added. “Longer term, we’re still aiming for the November 2020 high of $1959/65 and the 2021 peak. These protect the $1989/78.6 percent retracement and the $2072 20 percent retracement “”There is no top.”
The Relative Strength Index (RSI) indicator on the daily chart rose moderately to 35 after Wednesday’s comeback, indicating that the pair has corrected its oversold circumstances but lacks enough bullish momentum for a sustained recovery.
On the upside, $1,785 (the upper limit of last week’s consolidation channel) serves as an interim resistance level, ahead of $1,790 (the 100-day SMA) and $1,800 (the 200-day SMA) (psychological level, Fibonacci 50 percent retracement of April-June uptrend).
$1,750 (low of June 29) is the first level of support, followed by $1,730. (static level)./n
