Title: Gold Price Analysis: XAU/USD headed towards $1810, back above 200DMA, as US dollar/yields fad

Feb 01, 2022 07:40 AM ET

By: AnalysisWatch

The spot gold price broke through resistance in the form of the psychologically important $800 mark in Asia-Pacific trading on Tuesday and has since risen further towards the $1810 mark. In the process, spot prices have slightly exceeded the 200-day moving average at $1805.78 and are trading about 0.6% higher than the previous day at a current level of $1807. Market observers attribute the continued decline in the US dollar and US bond yields to the precious metal's benefit.

The DXY slipped another 0.4% on Tuesday to trade in the low $96.00 range, extending its losses to almost 1.2% since last Friday's highs of $97.50. Meanwhile, US 10-year nominal yields fell about 4 basis points on the day to below 1.75%, about 15 basis points below January's highs of around 1.90%. Meanwhile, the 10-year TIPS yield fell by almost 6 basis points and is now back below 0.70%, about 20 basis points below January's peak of 0.50%. A weaker US dollar makes USD-denominated gold cheaper for holders of international currencies, while lower yields reduce the opportunity cost of holding precious metals without a yield.

Some analysts also cited strong demand for exchange-traded funds as a reason for gold's strong recent gains, which have sent the precious metal up about 1.5 percent from last Friday's lows of $1780. Holdings in the world's largest gold exchange-traded fund, the SPDR Gold Trust, rose on Monday to their highest since mid-August, analysts told Reuters. Other analysts said speeches by the US Federal Reserve on Monday also offered some support to the precious metal. Policymakers stuck to the script by supporting near-term tightening and endorsing a March rate hike. However, they seemed to give no hint of a 50-bit move next month and were reticent to comment on the longer-term outlook for policy.