After reaching multi-week highs, gold lost traction.
The renewed strength of the US dollar appears to be weighing hard on the XAU/USD pair.
The technical picture implies that sellers are attempting to maintain control over gold’s movement.
On Monday, the XAU/USD pair closed above the 100-day SMA, and the rally continued on Tuesday. Gold made a quick U-turn after soaring to its highest level in nearly three weeks at $1,815, and was last seen registering minor daily gains at $1,795.
The precious metal’s bullish momentum was preserved earlier in the day due to a lack of fundamental developments, with the daily close above the 100-day SMA ratcheting up technical buying pressure.
The increased USD strength forced XAU/USD to shift south in the second half of the day. The sharp drop in Wall Street’s main indexes after the opening bell drew speculators into the greenback in the early American session. The US Dollar Index rose near the multi-month high of 92.74 achieved last week, reflecting the USD’s optimistic performance.
The more than 4% drop in the benchmark 10-year US Treasury bond yield, on the other hand, is assisting gold in limiting its losses for the time being.
The ISM Services PMI rose to 60.1 in June, the sole data from the US released on Tuesday, indicating that business activity in the US service sector continued to rise at a healthy pace in June. On the downside, this was the lowest reading since February, and it was also lower than the market consensus of 63.5. Further details of the publication revealed that input price pressures remained high over that time, with the Prices Paid component coming in at 79.5. The FOMC will issue the minutes of its June meeting on Wednesday, and investors will be looking for new signals about the timing of tapering. Several FOMC policymakers have expressed support for tapering to begin before the end of the year, and if the FOMC’s statement confirms that view, the USD rally may accelerate, pulling XAU/USD lower and vice versa.
Despite the big rally earlier in the day, the Relative Strength Index (RSI) indicator remains below 50, indicating that sellers are still trying to stay in the game. After successfully holding over $1,790, buyers may try to maintain control if the precious metal closes above $1,800 (psychological mark, Fibonacci 50 percent retracement of April-June advance) (100-day SMA). Above there, the next resistance is at $1,805 (20-day SMA), followed by $1,815 (20-day SMA) (daily high).
On the downside, $1,790 is the first support level, followed by $1,770 (Fibonacci 61.8 percent retracement) and $1,750. (June 29 low)./n
