The gold price’s short-term technical outlook is unchanged as bears continue to press the modestly bullish 100-daily moving average (DMA) around $1,937.
A bearish bias for the price of gold is shown by the 14-day Relative Strength Index (RSI), which maintains a range below the midline. Furthermore, as the 21 DMA attempts to pass through the 50 DMA from above, Gold sellers are waiting for a confirmation of a Bear Cross.
To restart the correction towards the March 17 low of $1,918 requires a daily closing below the 100 DMA support. Following that, further falls might put the $1,900 round number in jeopardy.
On the other hand, any attempts at healing require acceptance over the $1,950 psychological limit. Then, gold bulls will assume control and go for Friday’s high of $1,957.
Should the recovery maintain momentum, the $1,970 static barrier could be a difficult nut for Gold buyers to break.
Principal Overview
In anticipation of a favourable reaction to the optimism around the US debt deal, the US Dollar is losing strength when full markets resume this coming Tuesday. Futures on US stock prices and government bonds are blatantly expressing market hopes that Congress will approve the debt agreement on Wednesday to avoid a default.
Republicans in Congress and White House officials have increased their lobbying efforts in favour of the accord, which has so far helped to put risk sentiment in a more stable position. The benchmark 10-year US Treasury bond yields are currently falling by 1.70%, which is driving the US Dollar Index to challenge the 104.00 level. This is driving the price of gold to defend the crucial support at $1,937.
The gold price is drifting towards two-month lows of $1,937 and is exposed to additional downside risks should risk-on trade acquire pace and highlight the most recent US Dollar loss. Despite increased betting on a 25 basis point (bps) rate hike by the US Federal Reserve (Fed) in June, which is supported by good US economic data and recent Fed officials’ hawkish perspective on interest rates, the US dollar correction is likely to stay modest.
Currently, the market is pricing in a 25 basis point Fed rate increase in June at 57%, down from 62% on Monday but still significantly higher than the 15% probability observed a week ago. The Federal Reserve Bank of Minneapolis president was quoted as saying, according to Reuters, “I think if I had to err, I would err on being a little bit too aggressive in terms of bringing inflation down.”
After the concerns over a US debt deal have subsided, focus is again on the economic data releases from the US. The most recent US Conference Board Consumer Confidence numbers will be released on Tuesday. While waiting for new trading instructions, gold traders will monitor the developments surrounding the US debt accord and the Fed statement.