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​Gold gains on weaker dollar, treasury yields

 

·         Gold rose on Tuesday, with a weaker dollar and U.S. bond yields providing some support to the precious metal, even as central banks move towards easing economic stimulus.

 

·         Spot gold rose 0.7% to $1,776.03 per ounce by 0620 GMT, while U.S. gold futures gained 0.7% to $1,778.20.

 

·         The dollar index hit a two-week low, making bullion cheaper for buyers in other currencies.

 

·         U.S. benchmark 10-year Treasury yields also weakened, reducing non-yielding bullion’s opportunity cost.

 

·         “Though gold is range-bound, if it holds above $1,760, it could rise to $1,782 and possibly even $1,800,” said Nicholas Frappell, global general manager at ABC Bullion, adding that a break below $1,759 could push it down to $1,737-$1,741.

 

·         “But people are not persuaded enough to go very long on gold and macro investors for instance don’t seem to be persuaded to buy more gold to hedge inflation,” Frappel said, noting that stimulus tapering by central banks was “just a fact of life.”

 

·         The Bank of England was gearing up to raise interest rates as inflation risks mount, Governor Andrew Bailey said on Sunday.

 

·         “Economic growth is getting hurt and if risky assets start showing a correction, then gold is going to shine bright,” said Kunal Shah, head of research at Nirmal Bang Commodities, Mumbai, adding that gold could hit $1,850-$1,860 by end-November and bullion could rise even if yields move higher.

 

·         Gold eyes $1,780 amid recent USD weakness

Gold prices lock in some fresh gains above $1,770 amid a recent pullback in the greenback. The US benchmark Treasury yields trade lower at 1.57% with 0.57% losses, which weigh on the greenback.  A lower USD valuation enhances the appeal of the precious metal for the other currencies holders. 
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The near term picture is bearish, although gold needs to clearly break below 1,761.00 to confirm another leg south. The 4-hour chart shows that moving averages remain directionless, reflecting the absence of a clear trend, with only the 100 SMA below the current level. However, technical indicators remain within negative levels, the RSI consolidating at around 42 and the Momentum heading firmly lower near oversold readings, reflecting bears’ dominance.

Support levels: 1,761.00 1,750.00 1,735.80

Resistance levels: 1,770.40 1,777.75 1,790.59

·         Gold Price Forecast: XAU/USD eyes $1,780 amid recent USD weakness

Market participants seem convinced that the Fed will begin rolling back its massive pandemic-era stimulus by the end of this year. Investors have also started pricing in the possibility of an interest rate hike in 2022 amid fears about a faster than expected rise in inflation. Adding to this, the Bank of England Governor Andrew Bailey sent a fresh signal that the British central bank is gearing up to raise interest rates to counter growing inflation risks. Growing market acceptance about the prospects for a policy tightening by the Fed/BoE warrants some caution before positioning for any further appreciating move for gold.

There isn't any major market-moving economic data due for release on Tuesday, leaving gold at the mercy of the broader market risk sentiment and bond yields. That said, scheduled speeches by BoE MPC Member Catherine Mann and Governor Andrew Bailey might provide some impetus to gold. Later during the US session, comments by Fed Governor Michelle Bowman will influence the USD price dynamics and produce some meaningful trading opportunities around gold.

 

Technical outlook

 

On the flip side, immediate resistance is pegged near the $1,780-82 region, which if cleared decisively should allow bulls to make a fresh attempt to conquer the $1,800 mark. Some follow-through buying has the potential to lift the XAU/USD back towards the $1,832-34 heavy supply zone. The $1,810 area, followed by the $1,818 region could act as an intermediate hurdle on the way up.

 

·         Spot silver gained 1.6% to $23.53 per ounce, while platinum was up 1.5% at $1,050.84 and palladium rose 1.8% to $2,051.22.

·         China seen keeping lending benchmark steady for 18th straight month

China is expected to keep its benchmark lending rate steady for the 18th straight month at its October fixing on Wednesday, despite growing pressure on the economy, a Reuters survey showed.

 

·         Alibaba launches new server chip to boost its cloud business in challenge to Amazon and Microsoft

 

·         Faced with a power crisis, China may have ‘little choice’ but to ramp up coal consumption

China may have to set aside its ambitious plans to cut carbon emissions — at least in the short term — in order to tide over its worsening power crisis, said analysts.

 

·         Australia's RBA sees growth returning after Delta, but no rate rise

Australia's central bank expects the economy to return to growth in the current quarter after an outbreak of the Delta variant of COVID-19 derailed a recovery, but still does not expect to raise interest rates until 2024, board minutes showed on Tuesday.

 

·         China, Russia navy ships jointly sail through Japan strait

A group of 10 naval vessels from China and Russia sailed through a strait separating Japan's main island and its northern island of Hokkaido on Monday, the Japanese government said, adding that it is closely watching such activities.

It was the first time Japan has confirmed the passage of Chinese and Russian naval vessels sailing together through the Tsugaru Strait, which separates the Sea of Japan from the Pacific.

 

·         North Korea fired an unidentified projectile into the sea, South Korea says

Separately, Japanese Prime Minister Fumio Kishida said Pyongyang fired two ballistic missiles, and slammed its repeated provocations as “extremely regrettable,” according to NBC News.

·         Maldives calls for rapid and immediate action to fight climate change

The Group of 20 nations contribute to 75% of the world’s emissions, said Aminath Shauna, the Maldives’ minister of environment, climate change and technology, on Monday during CNBC’s Sustainable Future Forum.

“They have not cut down and in fact, as we are coming out of the pandemic, in 2021 we have seen a 5% increase in emissions from the developed world,” she said. “No one is listening to … what we are experiencing in terms of extreme weather events.”

 

·         Tradition vs credibility: Inside the SE Asian meet that snubbed Myanmar

 

Reference: Reuters, CNBC, FXStreet, Kitco