XAUUSD reverses to $1,770 as Russia-Poland noise hogs limelight

  • Gold price has corrected to near $1,770.00 as Russia-Poland noise supported the US Dollar Index.
  • An absence of quantitative interest rate guidance from Federal Reserve policymakers could push traction toward gold prices.
  • The United States Retail Sales are seen higher at 0.9% despite a decline in October inflation figures.
  • Gold price to remain topsy-turvy as investors await NATO ambassadors meeting outcome.

Gold price (XAUUSD) has dropped to near the immediate support of $1,770.00 after facing barricades around $1,780.00 in the Tokyo session. The precious metal is continuously sensing selling pressure in attempts of overstepping the critical resistance. Broadly, the gold prices have turned sideways in a $1,768-1,784 range and an expansion would be witnessed after further developments on Russia-Poland noise and the release of the United States Retail Sales data. The precious metal has observed significant offers at elevated levels that could terminate the four-day winning streak. Meanwhile, the US Dollar Index (DXY) has refreshed its day’s high at 106.78, and a change of risk profile stewardship to pessimism could offer a chance to test Tuesday’s high around 107.00.

Gold price seeks clarity on Russia-Poland noise

Gold price (XAUUSD) is looking for more clarity on Russian military attacks on Poland as statements from US President Joe Biden and Polish President Andrzej Duda has created obscurity. In early Asia, US President Joe Biden cited that, “based on the trajectory, it is unlikely that the missile is fired from Russia.” Also, Polish President Andrzej Duda confirmed that what happened was a one-off incident, adding that there were no indications that there will be a repeat of today’s incident.

The outcome of the NATO ambassadors meeting is expected to display the further direction in the gold prices and the US Dollar. This year, Russia’s invasion of Ukraine has already brought significant volatility in the global markets. And, an extension of Russian military attacks on members of NATO would accelerate it further. This might also impact gold prices significantly.

Yields rebound as Federal Reserve policymakers favor further policy tightening

Post a significant decline in inflation figures in the United States, the returns on the United States government bonds have been a major victim. The 10-year United States Treasury yields have dropped sharply from a high of 4.34% to a low near 3.76%. The alpha on long-term United States bonds has rebounded to 3.80% after Federal Reserve (Fed) policymakers sounded solid for further policy tightening by the United States central bank.

Atlanta Fed President Raphael Bostic said on Tuesday that he isn’t expecting to see the full impact of monetary policy on inflation for months, reported Reuters. He further added that indicators showing ease in inflationary pressures have not been witnessed yet so anticipating more interest rate hikes ahead. Also, Fed Governor Lisa Cook reiterated on Tuesday that inflation in the United States is still “much too high” and added that the focus for the Federal Reserve is on addressing inflation. As per the CME FedWatch tool, the odds of a fifth consecutive 75 basis points (bps) interest rate hike stood below 20%. It is worth mentioning that Federal Reserve policymakers have favored the continuation of policy tightening but have refrained from providing quantitative guidance. This might keep reins in the gold prices ahead.

Key trigger ahead is United States Retail Sales data

This week, the United States economic calendar has nothing much to offer except Wednesday’s Retail Sales data. As per the projections, the Retail Sales data for October will improve meaningfully to 0.9% vs. the prior release of 0%. It is worth noting that the Consumer Price Index (CPI) was trimmed in October. In spite of that, the Retail Sales data is seen as higher, which indicates robust demand by households.

A better-than-projected United States Retail Sales data may provide a cushion to the US Dollar and impact the XAUUSD price.

Gold technical outlook

XAUUSD is declining gradually towards the upward-sloping trendline placed from November 3 low at $1,616.67 on a four-hour scale. The gold prices have kissed the 50-period Exponential Moving Average (EMA) at $1.770.50 after a corrective move. While, the 100-period EMA at $1,756.00 is firmly advancing, which adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bullish range of 60.00-40.00 amidst correction. This doesn’t reflect a change in secular trend but a loss in upside momentum cannot be ruled out.

Investors would like to play the correction by creating longs near the upward-sloping trendline. This could terminate short-term optimism in the US Dollar bulls.



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