Oct 5, 2022 5:44 AM ET
Gold prices are in the red for the first time this week as the U.S. dollar is experiencing strong demand amid a risk-off market profile. The greenback is unwinding from the overnight 1.3% selloff, which marked its biggest drop since March 2020, ahead of the critical US ADP jobs report and ISM services PMI.
Following the RBNZ's 50 basis point rate hike, hopes for aggressive rate hikes by the Fed have returned, fueling a further rally in US Treasury yields across the curve. Gold, which has no yields, is affected by the dollar rally along with yields.
Escalating geopolitical tensions between Russia and the West give XAU bulls no respite as risk aversion flows and dollar demand dominate the financial market. Investors are awaiting key US economic data and Federal Reserve statements for the magnitude of the Fed's next rate hike.
From a technical point of view, the bearish Daily Moving Average (DMA) at $1,724 has moderated the rise in gold prices. A sustained break above the 50 DMA is needed to challenge the September highs at $1,735, above which the psychological $1,750 level will come into play.
To the downside, previous critical resistance, now at $1,700, could offer a temporary respite for buyers, below which the previous day's low of $1,695 could be revisited.