XAU / USD stays clear of key north hurdle

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Update: Gold (XAU / USD) shows a five-day uptrend of around $ 1,795 crucial resistance at the start of Monday. The yellow metal applauded the general weakness of the US dollar the day before to refresh the multi-day high, but failed to provide a daily close above 200 DMA and a descending trendline from June.

Fed Chairman Jerome Powell’s support for the cut and the absence of comments suggesting “transient” inflationary pressure, polled gold buyers on Friday. However, recent optimism over struggling Chinese real estate player Evergrande and the US stimulus package are joining low Treasury yields to keep the bulls positive.

Despite this, new covid fears from Beijing and talks about another real estate company in China, Modern Land, are struggling to pay off $ 250 million in 12.85% senior bonds due October 25. , challenge market sentiment and gold prices.

Above all, a light schedule and the expectation of preliminary US GDP for the third quarter of 2021 are questioning momentum traders.

Read: S&P 500 Futures, US Treasury yields falter in calm markets

End of update.

The price of gold ended the week below $ 1,800 after hitting new highs in October, near $ 1,813. At the time of writing, the XAU / USD is trading at $ 1,793 following the declining US dollar losses recorded on Friday after Federal Reserve Chairman Jerome Powell said the Fed should start trading soon. reduce its asset purchases, but is not yet expected to raise interest rates.

Powell also said employment is still too low and that high inflation will likely decline next year as pressures from the COVID-19 pandemic subside. The DXY hit a one-year high last week as investors assumed inflation would stay stubbornly high for longer.

The US dollar slips against the G10

Since the start of the month, all other G10 currencies except the JPY have outperformed the USD. The “catching up” movement of money market rates for other currencies was a contributing factor, with investors unwinding very long positions in the greenback.

Ten-year break-even points are firming to their highest levels since 2012, underscoring that inflation is a priority for global investors. Looking at the positioning data, speculators have only marginally added to their length and despite higher inflation expectations, with modest short hedging as prices rise.

The dollar rally has also faded as investors expect faster rate hikes in other currencies. Meanwhile, data on Friday showed business activity in the United States growing steadily in October, suggesting a resumption of economic growth at the start of the fourth quarter as COVID-19 infections declined.

“While gold prices have historically outperformed most of the major asset classes during times of high inflation, investors are cautious of the gold as they remain intensely focused on the price of the exit. Fed, ”TD Securities analysts explained. “Still, we argue that market prices for the Fed hikes remain far too hawkish, as they ignore the fact that a rise in inflation linked to a potential energy shock and persistent shortages in the supply chain would likely not prompt a response from the Fed. “

In addition, analysts have argued that the market is increasingly accounting for a policy error that is unlikely, given that central banks are likely to look past such disruptions as their reaction functions have been historically more correlated with growth than with inflation.

The reasons for owning the yellow metal are increasingly compelling as Fed prices are likely to ease. Against this backdrop, gold prices are hugely underperforming against historical analogues, but a breakout of the yellow metal from its multi-month downtrend could indicate that inflation hedge flows are finally winning out. on the speculative exodus linked to the Fed’s prices. ”

A fiscal drag in the United States and the end of extraordinary unemployment benefits are expected to slow the pace of economic gains, which should ultimately see Fed prices reversing to support gold prices.

Gold technical analysis

From a daily standpoint, gold attempted the higher price action on Friday, below. The top of Friday’s candle wick is a likely target for the sessions ahead. $ 1,835 from the guard territory to $ 1,880 as follows:

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