The XAU/USD (Gold/US Dollar) pair has resumed its downward trend after experiencing a minor pullback, currently hovering near the $1,870.00 level. The precious metal has been experiencing fluctuations recently as the US bond yields continue to rise, putting pressure on non-yielding assets like gold.
The Asia trading session is especially crucial for the XAU/USD pair, as it is here where the critical support level of $1,850.00 will be closely monitored. A dip below this level could signal further downward movement, while a hold above could provide some stability for the precious metal.
Investors and traders are closely watching the US bond yields, as higher yields tend to decrease demand for non-yielding assets like gold. In addition, the current economic landscape, marked by a recovering global economy and increasing inflationary pressures, is also playing a role in the fluctuations of the XAU/USD pair.
Technical Analysis
The XAU/USD pair resumed its downward trend after a short-lived rebound, reaching a critical support level of $1,850.00 in the Asian trading session. As the US bond yields continue to rise, the $1,850.0 support level will play a crucial role in determining the future direction of gold prices.
A sustained drop below this level could lead to further losses, while a rebound could signal a potential recovery. From a technical standpoint, the 21-day Simple Moving Average (SMA) of $1,914 will be closely watched as gold prices try to remain above this key level.
A break below the 21-day SMA could result in a decrease in price towards $1,900 and further downward momentum toward the bullish 50-day SMA of $1,847. However, the 14-day Relative Strength Index (RSI) suggests that a potential recovery for the price of gold may be short. The RSI is moving higher above the midline, indicating an improvement in market sentiment.
For the recovery to gain traction, the XAU/USD pair must break past the $1,920 round figure. A successful break could lead to a rebound toward the $1,934-$1,935 supply zone and bring the multi-month highs of $1,960 back into focus for gold bulls.
Economic Factors Affecting the XAU/USD Pair
The current state of the global economy is affecting the XAU/USD pair. The increasing inflationary pressures and a recovering global economy are adding pressure to non-yielding assets like gold, causing fluctuations in its price.
The FED’s monetary policy and its impact on the US dollar also play a role in determining the overall direction of the XAU/USD pair. A strong US dollar makes gold less appealing to investors as it reduces the returns from holding the precious metal.
On the other hand, a weak US dollar often leads to increased demand for gold as a safe-haven asset. Central bank policies, geopolitical tensions, global economic events such as trade tensions, monetary policy decisions, and economic data releases significantly impact the XAU/USD pair.
Investor sentiment plays a crucial role in determining the direction of gold prices. A shift in investor sentiment can cause a sudden surge or decline in the price of gold. In times of uncertainty and volatility, gold is often sought as a safe-haven asset.
That leads to increased demand and a higher price. On the other hand, a positive outlook on the global economy and declining geopolitical tensions can lead to a decrease in demand for the metal and a lower price.
