Sep 09, 2022 03:46AM ET
By: AnalysisWatch
Gold price stages a comeback as the US dollar corrects amid a risk-on mood.
Investors reposition after Powell’s speech, ahead of next week’s US inflation.
XAU/USD looks to $1,725 and $1,734 so long as $1,710 support holds.
Gold price is attempting a rebound from the $1,700 region once again, as the US dollar resumes its correction from two-decade highs amid the return of risk-on flows. The US Treasury yields take a breather but hold near multi-year high, as Fed Chair Jerome Powell cemented a 75 bps September Fed rate hike, with markets now pricing an 85% probability. Powell maintained that the Fed remains committed to bringing inflation down while warning against prematurely loosening policy during a Q&A presented by the Cato Institute on Thursday. The end-of-the-week flows and the market’s position readjustments ahead of next week’s US inflation data also offer a fresh boost to the yellow metal.
Gold price justifies the bullish RSI divergence as the bulls approach a convergence of the 100-SMA, 61.8% Fibonacci retracement level of July-August upside and a one-week-old rising trend line.
Given the bullish MACD signals, as well as the firmer RSI backing the higher low on prices, the XAU/USD is likely to overcome the $1,730 hurdle, which in turn could propel the commodity towards the August 25 swing high near $1,765.
However, the 50% Fibonacci retracement level near $1,745 may offer an intermediate halt during the run-up.
Alternatively, pullback moves may re-test the 78.6% Fibonacci retracement support, around $1,707, before directing gold bears towards the $1,700 threshold.
Even so, the sellers remain cautious as an upward sloping trend line from late July and the yearly low, respectively near $1,690 and $1,680, could test the metal’s further downside.