Gold prices edged up on Tuesday but hovered close to their lowest level in more than two weeks hit in the previous session, as the dollar gained on U.S. President Joe Biden’s nomination of Federal Reserve Chair Jerome Powell for a second term.
The dollar index held near a 16-month peak after Biden on Monday nominated Fed Chair Powell for a second four-year term, bolstering bets the central bank might raise interest rates sooner to curb growing inflation.
A resurgence of coronavirus cases and a jump in inflation do not at this point warrant a change in the European Central Bank’s plans to taper its bond purchases in March, ECB policymaker Francois Villeroy de Galhau said on Monday.
China’s economy faces new downward pressures but authorities should avoid rolling out economic measures in a “campaign-like and aggressive” way, Premier Li Keqiang said.
· Gold Price Forecast: XAU/USD eyes dead cat bounce towards $1,830 amid oversold RSI, focus on yields
Attention now turns towards the Preliminary Manufacturing and Services PMI reports from across the euro area and the US for fresh insights on the pace of the global economic recovery. The data could have a significant impact on the broader market sentiment, in turn, affecting the dollar valuations and gold price.
· Gold Price Chart - Technical outlook
Gold price has bounced off the critical 200-Simple Moving Average (SMA) at $1,805 on the four-hour chart, having tested fresh bids below the latter on Monday.
The Relative Strength Index (RSI) trades flat within the oversold region, suggesting that a brief bounce cannot be ruled out.
If the bears continue to take a breather, then gold price could extend its rebound towards the horizontal 100-SMA at $1,830.
However, should gold sellers defy the oversold conditions, the price could resume its downtrend to retest the 200-SMA.
A four-hourly candlestick closing below the latter will open floors towards early November levels around $1,785.
The gold price action is likely to remain rangebound heading into Wednesday’s US data dump and Fed minutes. Due to the Thanksgiving Day holiday on Thursday, the US GDP, Durable Goods and PCE inflation data will be released this Wednesday.
· Gold Price Forecast: XAU/USD slides below $1,830, fresh two-week low
Gold extended last week's retracement slide from the $1,877 area, or a five-month peak and lost additional ground for the third successive day on Monday. The XAU/USD continued drifting lower through the early North American session and dropped to fresh two-week lows, around the $1,830 region in the last hour. US government bonds witnessed fresh selling amid growing market acceptance that the Fed will need to act more decisively to slow inflation. In fact, the yield on the two-year US Treasury note, which is highly sensitive to interest rate expectations, held steady near the highest level since March 2020. This turned out to be a key factor that drove flows away from the non-yielding yellow metal.
· Technical outlook
Even from a technical perspective, the XAU/USD, so far, has managed to hold its neck above the $1,834-32 strong horizontal resistance breakpoint. The mentioned hurdle-turned-support should act as a key pivotal point for traders, which if broken decisively might prompt some technical selling. Gold might then accelerate the decline towards testing the next relevant support near the $1,810-08 region before eventually dropping to the $1,800 round figure.
On the flip side, the $1,848-50 area now seems to have emerged as immediate strong resistance. Some follow-through buying has the potential to push spot prices beyond the $1,863-65 intermediate hurdle, towards testing a multi-month high level of $1,877 touched last Tuesday.
· Powell, Brainard nod to inflation threat in nomination remarks
· Investors bet Powell's Fed will get more aggressive on inflation
· U.S. set to unveil emergency oil release in bid to fight high prices
· White House says U.S. will not lock down to fight Covid as European nations implement restrictions
· Credit Suisse chairman warns 'temporary inflation' talk too upbeat
The talking down of speeding inflation as a temporary phenomenon by many central banks poses risks of a more intense monetary adjustment at a later date than would otherwise be needed, Credit Suisse Chairman Antonio Horta-Osorio said.
"Markets have been giving a lot of credit to central banks... but the latest indicators are that the temporary is perhaps less temporary," he told a banking conference in Lisbon, calling the central banks' discourse "somewhat courageous"
"Monetary policy must be aware of its capabilities, but it cannot resolve supply shocks. We must, at this moment, be patient," he said, advocating "a monetary policy that remains accommodative throughout this recovery phase" and a fiscal policy to support more vulnerable sectors.
· China c.bank to lower corporate funding costs, aid small firms
· China sets stage for easier monetary policy as central bank deletes language from new report
· Goldman Sachs expects two rate hikes by South Korea’s central bank in 2022
Goohoon Kwon of Goldman Sachs predicts the pace of monetary policy normalization by the Bank of Korea next year and discusses whether the central bank has a handle on the overheating housing market.
· Singapore Oct core inflation up 1.5%, biggest jump in nearly 3 yrs
· Emerging cenbank rate hikes will bolster local debt, weigh on stocks - BlackRock
Central banks in developing economies ramping up interest rates will be supportive for emerging market debt and provide a buffer against policy tightening by the U.S. Federal Reserve, but could spell trouble for equities, BlackRock said on Monday.
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