XAU/USD consolidates near $1,825 area, two-month tops

Update: Gold extended its sideways consolidative price move through the early North American session and remained confined in a range, around the $1,825 region, or two-month tops touched earlier this Tuesday. The Fed’s dovish outlook, along with a fresh leg down in the US Treasury bond yields continued lending some support to the non-yielding yellow metal. Apart from this, the prevalent cautious mood around the equity markets further benefitted the previous metal’s safe-haven status.

That said, the emergence of some dip-buying around the US dollar acted as a headwind for dollar-denominated commodities, including gold. Investors also seemed reluctant to place aggressive bets ahead of Wednesday’s release of the latest US consumer inflation figures. The data will influence the Fed rate hike expectations and provide a fresh directional impetus to gold. In the meantime, traders on Tuesday might take cues from Fed Chair Jerome Powell’s remarks at an online conference.

Previous update: Gold (XAU/USD) benefits from the downbeat US dollar to refresh a two-month high of around $1,825, picking up bids heading into Tuesday’s European session.

The indecision over the US Federal Reserve’s (Fed) next moves, amid reflation fears and Fed reshuffle talks, weighs on the risk appetite. However, Japan’s stimulus news and hopes of an economic aid package from the US keep buyers hopeful.

“Japan’s ruling Liberal Democratic Party (LDP) and coalition partner Komeito agreed to offer 50,000 yen ($441) worth of vouchers to children aged 18 or younger as part of the government’s stimulus package, Jiji news agency reported on Tuesday,” per Reuters.

It’s worth noting that inflation fears remain on the table and keep the US dollar buyers hopeful following the strong US jobs report for October, published Friday. Even so, there’s a wide divide among policymakers relating to the rate hike and hence the greenback bears track the US Treasury yields amid market consolidation.

Against this backdrop, US stock futures whereas the US 10-year Treasury yields drop three basis points (bps) to 1.46%.

For further direction, speeches from the key central bankers from the US, Eurozone and the UK will be important.

Technical analysis

Gold seesaws around an upper end of the 13-day-old rising channel amid bullish MACD signals.

In addition to the stated channel’s resistance line, the 61.8% Fibonacci retracement (Fibo.) level of the February-June downtrend also highlights $1,830 as important resistance.

Also crucial for gold buyers is the double-top formation around $1,834-35, marked in July and September.

Given the bullish MACD signals and the downbeat US dollar, gold prices are likely to remain firmer. However, further upside hinges on a clear run-up past $1,835.

Alternatively, pullback moves may aim to retest the horizontal area comprising multiple levels marked since late August around $1,810-09.

Following that, the $1,800 threshold and lower line of the channel around $1,764 will be crucial to watch.

Gold: Daily chart

Trend: Pullback expected


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