Forex

XAU/USD advances towards $1,750 amid subdued DXY, US Durable Goods hog limelight


  • Gold price has extended its recovery after resurfacing from $1,730.00 as the risk-off profile has eased.
  • Federal Reserve policymakers have turned cautiously hawkish on interest rates as risks of upside inflation have trimmed.
  • The US Dollar is awaiting the release of the United States Durable Goods Orders for further guidance.
  • Gold price is marching towards $1,750.00 as prior resistance at around $1,735 has turned into a potential cushion.

Gold price (XAU/USD) has confidently advanced to near the critical resistance of $1,745.00 in the Tokyo session after retreating from around the cushion of $1,730.00. The precious metal has hogged the limelight as the US Dollar Index (DXY) is displaying a subdued performance. A three-day winning streak in the US Dollar could get halted as the risk profile is indicating a shift in momentum.

A recovery in risk-perceived assets due to improved risk appetite is setting the stage for reversal for the US Dollar. Meanwhile, Gold price is gaining traction as investors are turning anxious ahead of the release of the United States Durable Goods Orders data. Demand for durable goods carries a significant impact on gold prices as a sheer deviation from projections could force the Federal Reserve (Fed) to review its policy-making.

A positive risk profile is also supporting S&P500 futures for a recovery. The 500-stock basket futures are trading with mild gains in the Asian session after displaying weakness on Monday. Going forward, the S&P500 futures could turn extremely volatile due to shortened week led by Thanksgiving Day. Meanwhile, the returns on United States government bonds are under the scanner of short builders as chances for a slowdown in the rate hike pace by the Federal Reserve are escalating.

US Treasury yields are losing traction as Federal Reserve policymakers turn cautiously hawkish

As United States interest rates have reached nearby elevated levels and the inflation rate has displayed signs of extreme exhaustion, Federal Reserve policymakers have softened their ‘extreme hawkish’ stance on interest rates.

Cleveland Fed Bank President Loretta Mester supported the view that it makes sense to slow down the pace of interest rate hikes a bit while asked about interest rate guidance in an interview with CNBC. He further added that “We have had some good news on the inflation front, but need more and sustained good news”. However, he doesn’t see any pause in the rate hike cycle yet.

Adding to that, San Francisco Fed President Mary Daly said on Monday that she is not prepared to say what hike the Federal Reserve should do at December Federal Open Market Committee (FOMC) meeting but favored that “it will be right for the Federal Reserve to slow its rate hike pace.

China truckload gold to cut dependence on US Dollar

Mounting sanctions on Russia by the West post its invasion of Ukraine has made it a self-requisite for some countries to reduce their dependency on might US Dollar. A few countries are truck loading gold to get self-dependent in case of any turmoil. According to the November report by industry group the World Gold Council, Central banks bought a net 399.3 tonnes of gold in the July-September period, more than quadrupling on the year. Buyers such as the central banks of Turkey, Uzbekistan, and India reported purchases of 31.2 tonnes, 26.1 tonnes, and 17.5 tonnes, respectively.

Meanwhile, Chinese imports of gold from Russia surged dramatically in July, soaring more than eight-fold on the month and roughly 50 times the year-earlier level, according to China’s customs authorities. The headline release is also supporting gold prices.

Investors seek United States Durable Goods Orders for further guidance

A light economic calendar in a holiday-truncated week has made the demand for Durable Goods, a critical event ahead. According to the expectations, the economic data is seen stable at 0.4%. Sustainability in the Durable Goods Orders data in times when interest rates are accelerating could create more troubles for Federal Reserve chair Jerome Powell. The Federal Reserve has been working on keeping the overall demand on a low profile to cool down inflation. This also indicates that households are resorting to higher interest obligations to address their need for durable goods. A significant rise in households’ borrowing could result in higher delinquency costs for commercial banks.

Gold price technical outlook

Gold price has recovered sharply after testing the horizontal support plotted from September 12 high at $1,735.17 on a four-hour scale. The precious metal has witnessed a change in polarity as earlier resistance has turned into support now. The asset is attempting to regain upside above the 23.6% Fibonacci retracement (placed from November 3 low at $1,616.39 to November 15 high at $1,786.55) at $1,746.67.

A battle between gold price and the 50-period Exponential Moving Average (EMA) at around $1,746.00 would be crucial as surpass of the same would put the former in the driving seat.

Meanwhile, the Relative Strength Index (RSI) (14) is recovering after dropping into the bearish range of 20.00-40.00.

 



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